September 12, 2013

Profiling Canada’s six largest cities (Part 2)

Continued from Economy at a Glance Part 1.

Ottawa-Gatineau is synonymous with politics. Unlike Montreal, however, the emphasis isn’t so much on ideology. Rather, the consuming passion finds expression in the combative use of power.

While in session, there’s a daily dance in the House of Commons. And now there’s a heated debate about whether or not the Senate can be adequately reformed, in light of expense claim excesses. Some feel the Upper Chamber should be abolished altogether.

Reforms being considered would set term limits and require that Senators be elected to office.

Recent federal measures to control government spending, accepted as necessary within a philosophical shift towards austerity, have resulted in a decline in payrolls.

Among the six major cities highlighted in this article, only Ottawa-Gatineau has recorded a significant year-over-year decline in employment, -2.4%, in Statistics Canada’s latest labour market report.

Prior to the collapse early in the new millennium, Ottawa was renowned for its high-tech sector. Nortel was one of the local region’s highest flyers, accounting for many highly-skilled jobs on the cutting edge of technology.

The city earned the nickname Silicon Valley North.

But Nortel imploded and the office vacancy rate in the city’s suburbs exploded. Even with a pick-up in space demand from other notable employers, it remains near 10%.

While there is still a large and impressive knowledge-based business presence in Ottawa — with telecommunications in the forefront — it’s not quite as prominent as in the past.

The economies of Calgary and Edmonton are mainly grounded in energy development.

Edmonton has two advantages. It’s the seat of the provincial legislature and it lies in closer proximity to the Athabasca oilsands.

But fuel company headquarters, business professionals (e.g., lawyers, accountants and building designers) and the financial community are largely based in Calgary. Hence the higher value for home prices in the province’s southern city.

It will be seen a little further along in this article that the average resale home price in Calgary carries a 27% premium versus Edmonton.

Natural gas production in Alberta — much of which is intended for export — is being challenged by huge new reserves being opened up in shale rock deposits in America.

But the oil sector’s future will be assured if President Barack Obama can ever be persuaded to approve TransCanada Corporation’s Keystone XL pipeline extension to the Gulf Coast.

If that project moves to permanent hold — i.e., awaiting a return of the GOP to the White House — then oil company executives must hope for good news on approvals for distribution systems to Canada’s Pacific and/or Atlantic Coasts.

It may be a shock for some to hear, but Vancouver shares a similarity with Montreal. While Toronto, Calgary and Edmonton are largely business-oriented, West Coast residents are more attuned to the environment and an artistic slant on life.

The large number of television shows that feature a credit at the end saying “filmed in or around Vancouver” is always a pleasure to see.

Vancouver has just been ranked third most livable city in the world by the Economist Magazine’s Intelligence Unit. The listing is based on 30 factors, ranging from health care to terrorism threats.

Melbourne, Australia, is number one. Vienna, Austria, is in second place. It’s also worth noting that Toronto and Calgary are fourth and fifth respectively. One has to wonder if the judges have ever tried driving in Vancouver or Toronto during rush hour, but maybe I’m just being petty.

London and New York appear as numbers 55 and 56 on the list, mainly due to their experience with and exposure to violence from outside sources.

Canada is a nation dependent on export sales. Toronto ships cars to the U.S. Montreal sells airplanes and aerospace parts around the world. Business in Calgary and Edmonton is significantly geared towards exporting oil and natural gas.

The Port of Vancouver funnels products to Asia and the U.S. west Coast, but the commodity (e.g., grains, fertilizers, etc.) is often supplied by other provinces.

B.C., with 13% of the nation’s population, provides only 7% of Canada’s total exports.

The region is richly endowed in forestry products, metals and minerals. It should be doing better.

The move to develop a liquefied natural gas logistics hub in the north of the province, targeted at Pacific Rim customers, will be a bold step into a more outward-looking future.

What Vancouver has been doing right is welcoming immigrants. A strong inflow of individuals from Asia, often with solid financial backing, has been helping to drive the economy forward.

It also partly accounts for why resale home prices in Vancouver far exceed anywhere else in the country.

The Canadian Real Estate Association (CREA) has calculated that the average selling price of an existing home in Vancouver this July was $757,000.

Among our six most populous cities, second place went to Toronto at $513,000, with Calgary’s $438,000 next in line. Edmonton’s $345,000 figure was third.

Montreal brought up the rear at $329,339. In fact, the average price of a resale home in Montreal has now dropped below St. John’s Newfoundland ($335,000).

There is a further example of how resources rule in Canada. Statistics Canada’s monthly Payroll, Employment, Earnings and Hours report sets out weekly earnings in the provinces.

This can serve as a proxy for city information, since it was earlier established that five of our six major cities dominate their provincial surroundings.

The leader in average weekly earnings, including overtime, is presently Alberta, $1,110.00. Next is Ontario, $931.00, followed by B.C., $877.00. Quebec lags at $838.00.

But I should conclude with one final observation about the importance of raw materials development in Canada.

Employers in the two new emerging giants, Saskatchewan ($953.00) and Newfoundland and Labrador ($942.00), are now writing average weekly pay cheques that are higher than in any other province with the exception of Alberta.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

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