Alex Carrick: An Angel on our Shoulder

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In the fictitious town of Sunnydale, California, the vampires and demons keep on coming no matter how hard Buffy, Willow, Xander and Giles try to fend them off.

Of course, I’m speaking of the basic plotline from the late ’90s and early ’00s TV show, Buffy the Vampire Slayer.

Summertime has ended, the holidays are over and it’s back to economy-watching once again for me and my fellow analysts. However, during many evenings over the last several months, Buffy was the show my family turned to for entertainment. We’ve been catching all the old episodes in sequence by way of a streaming download service and a home entertainment system that channels iPad video images through an LCD projector. We hang a giant sheet on the wall and bring the advantages of a real-life cinema experience right into our home. The audio portion is attached to some speakers and the overall effect is astonishing. I can’t recommend this approach more highly.

This article is not meant to be a consumer electronics piece, however. Rather it’s the set-up to my contention – as if most of us don’t already know it – that we are ultra-fortunate to be living in Canada.

Since 2009, Europeans have been experiencing lives similar to the residents of Buffy’s mythical hometown. They’ve been beset by one set of economic problems after another. First Greece was sucked into an evil vortex, then Ireland and Portugal, and finally Spain and Italy.

I always have trouble remembering if Transylvania belongs to the 27-member European Union. If not, it should be asked to join immediately. There are people there who know how to fight dark forces.

In America, certain states (i.e., California again) have been experiencing budget crises for years. At the national level, the issue of how to deal with a huge financing shortfall is the primary debating point in the coming Presidential election.

Will Mr. Obama’s healthcare package survive after the November election? Will the Bush-era tax cuts be allowed to expire at the end of this year? What will America look like from 2013 on? Will it have a much smaller government presence? The tax cuts will almost certainly be extended for most people. The exception might be the super-rich. On this point lies the crux of the philosophical difference between Democrats and Republicans. The former see a larger share of public funding coming from the wealthy as a necessary means to prop up government receipts while spending cuts are also initiated. The net effect will be to shift Washington’s finances onto sounder financial footing. The latter only want to see spending slashed. The Grand Old Party has a firm conviction that a tax hike for the wealthy would cut into the entrepreneurial spirit of risk-takers. Even some conservative pundits have expressed reservations about the timing of too-deep spending cuts. Government employment and funding programs provide a backstop for an economy that still appears wobbly at times.

The Chinese economic dragon has problems as well, both of an economic and social nature. Through lower interest rates and more government spending, attempts are being made to boost activity levels. China is being negatively impacted by weaker trade with the rest of the world.

Furthermore, China’s one child policy is leading to a workforce that is gradually being deprived of younger entrants.

Canada is sitting in a relatively enviable position. We have close ties to the American economy, plus we stand ready to supply the emerging world with resources once a stronger growth path is re-established. The U.S. economy is showing progress, whether it’s immediately apparent or not.

The service sector accounts for close to seven out of every 10 American jobs. The total number of individuals working in services has climbed back almost level with where it was before the recession. U.S. housing starts are shedding their zombie-like state and beginning to rise from the dead after a period of time approaching seven years.

For too long, residential investment within U.S. gross domestic product (GDP) has detracted from the total rather than been a positive influence. Growth in residential spending will quickly yield a higher national output figure, never mind how much it will contribute to an overall better employment scene.

For Canada, what’s the worst that’s being imagined? Again, the focus is on the housing sector.

Canadian housing starts may fall from their current elevated heights. The latest number was 208,500 units seasonally adjusted and annualized in July.  Any figure above 200,000 units is very strong. Annualized monthly starts have been above that benchmark in 11 of the past 13 months.  A Canadian home starts retreat to 180,000 units coincident with a nation-wide price drop of 10 per cent may be forthcoming. So far, new and existing homes have been holding their value. Two factors will continue to provide support – ongoing strength in labour markets and the exceptionally low level of interest rates.

Admittedly, the condo market has probably been overheated in Toronto and Vancouver. As a result, there are indications developers are modifying their optimistic plans. But it’s also true that overseas investors will continue to be interested in expanding their international holdings. Canada is seen as a desirable location for diversifying residential portfolios. And domestic empty-nesters are quickly altering their lifestyles by moving from the suburbs to downtown.

A history of mixed-use development in Canada has ensured lively and mostly-safe urban cores in our major cities. The low interest rates are an incentive for a host of expenditures, including spending on second homes and other recreational properties. Short-term variable mortgage rates and five-year fixed rates as cheap as they are now may never occur again in most people’s lifetimes.

In a year or two, when the world economy begins to expand more vigorously, Canada will be one of the first countries to benefit. Commodity price increases are currently in remission because export-dependent China has been sideswiped by reduced demand from Europe.

The turnaround, when it comes, will set in motion another bout of commodity price hikes that will place only a limited number of countries – most prominently Canada, Australia, Russia and Brazil – on much faster growth paths

The long-term prospects for Canadian resource sector mega-projects can only be viewed as extremely positive. There’s also the matter of Canada’s strong financial position. Our banking system is now acknowledged as one of the best in the world. And our governments at both the federal and provincial levels are approaching the future with level-headed plans to keep debt under wraps.

Even in matters of the physical environment, we seem blessed. We have our forest fires, ice storms and pockets of drought, but their severity is surely not as great as in many places elsewhere. Other parts of the world are often devastated by monsoons, typhoons, volcanic eruptions, earthquakes and tornado alleys, to name just a few.

Take a moment to linger over your summer destination memories. This country has it all: Rocky Mountain vistas, spectacular coastlines along the Atlantic and Pacific, endless Prairie sightlines, the deep rumble of Niagara Falls, and the Northern-lights show in the Arctic and Georgian Bay sunsets.

Let’s wrap up with a final nod to the Buffy series. There was one member of the “Scooby” gang who secretly stood watch over all the other friends. He was a vampire with a soul who managed to acquire his own spin-off series.

One could easily conclude that living in Canada means having an “Angel” on our shoulder.  

Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit www.dailycommercialnews.com/features/economy. Mr. Carrick’s lifestyle blog is at
www.alexcarrick.com and he would welcome a follow on Twitter (Alex_Carrick) or Facebook.  ww.alexcarrick.com

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