Friday's employment report highlighted a key difference between the Canadian and U.S. economies - surprisingly robust job creation in this country against significant job losses south of the border. Today's housing starts data should underscore another major difference - the strength of the housing sector here compared with the sorry state of affairs in the U.S. housing sector.
What are the expectations?
Housing starts in Canada in February are generally considered to have slowed modestly from January's levels but part of it is thought to be weather-related. Consensus has starts sliding to about 210,000 annualized last month from 222,700 in January. That compares with an average of about 228,000 last year.
Jacqui Douglas, economics strategist at TD Securities, expects the February number will come in around 202,000. The weather is a factor in that forecast. "Mother Nature was not working with the construction sector in February; we had some big snow storms that would have impacted central Canada and we also had some pretty cold temperatures," she said in an interview.
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She also noted that residential building permits also softened slightly.
"So we do think that the housing sector will moderate a bit going forward, which makes sense," she said. "It has just been so strong over the last couple of years."
The pace at which new construction jobs are being created suggests that the Canadian housing sector won't slow too quickly. Friday's eye-catching employment report showed that the construction industry added about 20,000 jobs last month, which means that almost 100,000 new construction jobs have been created over the past 12 months, thanks not only to the robust housing sector but also to the non-residential construction sector.
The fact that Canadian mortgage rates are easing is also a plus for the Canadian housing market as it suggests housing demand will remain strong, Ms. Douglas said.
The gains in construction sector employment was a significant factor in last Friday's Canadian jobs report. The much-better-than-expected numbers showed that Canada added 43,300 jobs on a net basis last month, despite signs that the economy was decelerating. That gain followed a rise of 46,400 in January.
Those numbers contrasted dramatically with the U.S. employment report, which was a major disappointment. Instead of rising 25,000 as had been anticipated, the so-called non-farm payrolls dropped 63,000 last month and that followed a 22,000 loss in January. That was the first back-to-back decline in five years. "Does anyone need more convincing that the U.S. is in recession?" asked Stéfane Marion, assistant chief economist at National Bank Financial.
The housing starts data has not tended to have much impact on Canadian financial markets.
"I don't think anybody is particularly worried about it right now," Ms. Douglas said. "I think everybody realizes that there is a huge difference between what is happening in the Canadian housing market and what is happening in the U.S. housing market."
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