Canada's Housing Bubble

Jan 20, 2010 Natalie Alcoba National Post

Almost 140,000 Torontonians who are looking for work remain unemployed — a whopping 30% more than a year ago — according to the latest economic numbers that show that the recession may be over, but the effects linger.

Toronto’s unemployment rate in December crept down from the previous month, from 9.7% to 9.4%, according to seasonally unadjusted data released by the city, but that’s far off from the 7.3% rate at the end of 2008.

University of Toronto Professor William Strange, an expert in urban economics, said he hardly looks at the month-to-month numbers because employment is so seasonal. The year-to-year figures matter more, he said. “What everyone says is that the recession has been over for a couple of quarters in a technical sense and that GDP is no longer contracting, but it’s going to take a while for employment to come back,” said Prof. Strange.

He said the difference between December, 2008, and December, 2009, “really, really jumped out at me.”

It corresponds with a leap in the city’s welfare caseload by more than 15%. In December, 2008, the caseload was 78,301 or 135,506 people, and one year later is 91,544 or 156,581 people.

The average hourly wage was virtually flat, coming in at $22.86.

Michael Williams, Toronto’s general manager of economic development and culture, said the number of people who are not working is truly higher, because Statistics Canada does not take into account “discouraged workers,” people who don’t have a job and stopped looking for one.

“It’s an unfortunately high number,” he said. “It means there’s a lot of pain for a lot of people and families in Toronto.”

He believes the city’s high unemployment rate is partly due to a large immigrant pool that has trouble finding work, and also its concentration of colleges and universities. “We all know that in recessions, [young people] have a real hard time finding work.”

He said while the rate is coming down, it’s worrisome that the month-to-month rate, which when seasonally adjusted shows it fixed at 10.1% in November and December, appears to have plateaued. “Does this mean that we’re going to have a very weak recovery, does this mean it’s taking a little while to kick in?”

The city has fewer stimulus tools than the province or the federal government, Mr. Williams said, but it is focusing its efforts on spurring small business growth — the area that is the first to come back after a recession — with advisory services, courses, and space at lower than market rent at three “incubator” sites. It also wants to help immigrant entrepreneurs and facilitate green jobs.

“We don’t have any money to do anything more. As you know, we have our own budget problems,” he said.

Meanwhile, other economic indicators are booming. The hot housing markets continues to defy logic, with numbers showing that the average price of a house in Toronto census metropolitan area increased 13% from November 2008 to 2009, to $418,502. Residential building permits in Toronto are up, over the same period, by 25%, while commercial permits are down 10%.

Prof. Strange said Toronto is behaving the way cities like Amsterdam or London, England, did in the housing cycle. Prices started to dip before the recession hit, but they didn’t bottom out like in some American cities, and then they flattened or they came back.

“It’s hard to believe that if employment doesn’t come back that those kind of price increases can continue,” he said.