Thoughts on Edmonton’s Economy
These are interesting times for economics enthusiasts. Staying current with economic data reports and news stories from Canada and the US seems like a full time job.
Crunching economic data, making sense of it, and then making predictions is complicated and time consuming. I feel it is important to stay on top of the economy, but my first priority are my real estate clients, so I will resist the urge to get too deep into economic theory.
The other day, my attention was brought to an article in the Globe and Mail which painted the economic picture in B.C. and Alberta as catastrophic. I could talk about the blatantly biased tone of the article but what is more disturbing is information that is left out of the article.
The authors report:
“In Alberta, personal bankruptcies soared by 27 per cent year-over-year in the 12-month period ended December, 2008, the Office of the Superintendent of Bankruptcy Canada said yesterday. That was nearly double the 14-per-cent increase for the entire country.”
Wow, sounds bad.. right? Well something didn’t feel quite right about that stat - they didn’t give any absolute numbers. So I thought I would check it out at the source. (See Table 3: Bankruptcies filed by consumers). So here’s the thing: Anytime you start with a small number, it takes a smaller absolute increase to equal a large percentage increase, than it would if the base number was large.
I thought I would compare apples to apples so I decided I would determine the Per Capita Bankruptcy Rate for Alberta and Ontario and then compare them.
What I found was that for the year ending December 2008 even after Alberta’s bankruptcy rate increased for the year, if the populations of both provinces were equal Ontario still had 65% more bankruptcies than Alberta (remember this is per person). Based on recent population numbers, the percentage of the population who filed for personal bankruptcy was 0.2785% in Ontario (36,200) and 0.1685% in Alberta (6,066) for 2008.
Although personal bankruptcy is a terrible experience for the person (and family) of those going through it, my opinion is that employment has a much more significant and widespread impact on an area’s economy.
Based on the latest monthly job stats, Alberta lost 200 jobs while Quebec lost 26,000 and Ontario lost 71,000 (the largest drop in more than three decades). Edmonton in contrast has one of the lowest unemployment rates in Canada at 3.6%.
Prosperity is relative. In the past as other regions of the country have struggled, workers have moved to Alberta for better job prospects.
Is it possible this might continue?
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Here Here! I must say, Nathan, this is a very well written article. Kudos to you!
It never ceases to amaze me that those with obviously the most to gain from distorting people’s perceptions of the real estate market (i.e. mainstream media companies) always try to spin the truth to their advantage. It is such a relief to finally read honest and insightful analysis from a truly unbiased source.
But I must admit, I feel a little stupid right now. Because, I actually read this headline before I saw it covered on this blog, yet I somehow failed to see through the obvious number-fudging going on until now.
And, while I am not yet a real estate professional, I still consider myself a reasonably intelligent and market savvy individual, so it really shocked me how easily I was initially fooled by the newspaper article’s blatant bias.
I guess that is why most people opt to buy and sell houses under the guidance of a REALTOR - sometimes the insight and advice the client receives truly is worth its price in gold!
Anyway, the point of my comment is that this blog post inspired me to dig a little deeper into the source data myself.
The first thing that jumped out at me was just how SMALL those bankruptcy numbers really are. I mean, 0.17% of Albertans declared bankruptcy in 2008, vs 0.28% in Ontario? I don’t care which Province has the better statistic, both are so to close to zero anyway I don’t think it really matters.
For example, I did some calculations and I found that a 0.17% Albertan bankruptcy rate means that only 1 in every 593 Albertans declared bankruptcy in 2008.
No wonder no one I know has been affected by this “big bust!” If I knew 600 people, and only 1 of them went bankrupt, I’d say as a group we would still be doing just fine!
And Ontario’s is only 1 in 359. That means if I met a different Ontarian almost every day of the year, barely 1 of them would have declared bankruptcy. Again, where’s the problem?
But, here is the truly most disturbing omission from their article:
2007 Data!!!
Yup, we need to look at the 2007 data. The newspaper article’s failure to quote the 2007 rates is just another example of their bias.
In 2007, the bankruptcy rates were (again, on a per capita basis):
Alberta = 1 in 755
Ontario = 1 in 413
So, Alberta went from 1 in 755 to 593. That’s about a 27% increase on a PER CAPITA basis in the bankruptcy rate.
And, Ontario went from 413 to 359. That’s only about a 15% PER CAPITA increase, roughly half the speed of Alberta’s per capita rate of change.
So, unless I am missing something, that is hardly evidence that Alberta is experiencing a “swifter, sharper downturn than other provinces” as the biased and misleading news article would like us to believe. But of course, they conveniently left that insightful analysis out of their article!
The lesson here, at least from my perspective, is clear: make your property decisions with the help of qualified and experienced REALTOR, instead of the biased “facts” promoted by the mainstream media.
If you don’t want to end up renting a roof over your head, I suggest you do the same.
PropertyPupil - Thanks for your comments and feedback. Your thorough research and analysis is very appreciated!
Thanks Nathan! I wasn’t 100% sure if my analysis was correct, but the agreement of a qualified REALTOR certainly bolsters my confidence.
Since Edmonton seems to be doing so well during these catastrophic economic conditions, would you have any insight into which areas of the Edmonton real estate market will see the biggest gains in 2009?
I am trying to determine which Edmonton properties will be the best investments, but I’m having difficulty at the moment finding anything attractive. Any ideas?
Thanks!
Grear article, hope this 2009 get better!
Hi Nathan, please help! I am in desperate need of your advice!
Here is a quote from today’s news:
“In Alberta, 23,300 people were receiving regular EI benefits in January, up 10.5 per cent from December. British Columbia had 56,100 beneficiaries, up 9 per cent and Ontario had 181,500, a 6.2 per cent increase.”
Source: http://www.thestar.com/News/Canada/article/607802
Does this mean that Alberta’s employment trend is actually worse than other Provinces?
This greatly concerns me, because up until now I have been banking on the expert advice given in your previous post that, “Although personal bankruptcy is a terrible experience…my opinion is that employment has a much more significant and widespread impact on an area’s economy.”
Does this mean that all Edmonton properties might actually decline in price?
I mean, every REALTOR worth their price in gold knows that crap is crap, and doesn’t sell (regardless of price).
But today’s news has me worried that the Edmonton properties I have considered as “not crap”, due to various extraneous factors, might actually not be immune to this global recession after all, and might fall in price along with the rest of the global real estate market!
Can you please help me out and provide your expert analysis on this?
Right now I am very worried my previous analysis may have been wrong somehow! What am I missing here?