By Craig Wong, The Canadian Press

OTTAWA – The Canadian economy has been on a three-month streak of job creation and businesses appear set to continue that into the next three months, but some economists are raising concerns about the quality of jobs that are being created.

CIBC World Markets senior economist Benjamin Tal said while the headline numbers about job creation have been good, the quality of the jobs has not been great.

And Tal suggested that as governments look to cut spending to balance their budgets, the situation isn’t likely to improve.

“This deterioration will probably continue over the next few months because I see some softening in government jobs which always tend to be relatively high quality jobs and I see some softening in construction jobs,” Tal said.

“So those two forces that have been very strongly supporting the economic recovery and the job market recovery of the past two years, will not be there and what will replace them will probably be service-oriented jobs.”

The Canadian economy created 28,000 jobs in June and 238,000 over the last 12 months. The results blew past a disappointing month in the U.S. where its much larger economy added just 18,000 jobs in June.

And the Bank of Canada’s business outlook survey found businesses were optimistic about the prospects of hiring new workers with 57 per cent of the firms surveyed expected to hire new workers over the next year compared with just four per cent of firms expected to have fewer employees.

However, the unemployment rate in Canada stood at 7.4 per cent, a full percentage point higher than where it stood before the financial crisis in 2008.

And average hourly wages in June were up just under two per cent compared with a year ago, less than the rate of inflation.

Tal pointed to the relative weakness in the other economic indicators for the second quarter that came even as the economy continued to crank out more jobs.

“There is a link between employment and income and if quality is going down, then this link is not as clear. You can have more and more jobs, creating less and less income,” he said.

“Consumer spending, income growth, retail sales, they’re all linked to quantity and quality. Granted, a low quality job is better than no job, but the headline numbers exaggerate the real health of the Canadian labour market.”

Canadian Auto Workers union economist Jim Stanford said the growth in the absolute number of jobs in Canada, while better than the U.S., is not as impressive as it appears to be.

Stanford notes that during that month, the Canadian population continued to grow so the increase in the number of jobs in Canada, while significant, doesn’t tell the whole picture.

He pointed to the employment rate in Canada as a better indicator. It stood at 62 per cent in June, up 0.2 percentage points from 12 months ago.

“At most we’ve recouped one-fifth of the damage,” he said of the losses in the recession.

“So even on the quantity grounds we have a huge distance to travel before we can reasonably say that the recession is over.”

Stanford pointed to the gains in part-time and self-employment as signs of weakness in the quality of the jobs created.

“There is some self-employment that reflects the positive dream of being your own boss and having a good idea that you want to build a business around, but a very large proportion of self-employment is people who lost their paid work and are now trying to make ends meet by doing consulting or selling Amway from their basement,” he said.

Tal said the change in the workforce and the available jobs has also been a structural one for the economy and education will be the key to success in finding work.

“It will be more difficult to find a job if you don’t have the qualifications,” he said.

“This is going to be a very brutal labour market with many opportunities, but if you don’t have the qualifications you have no chance.” http://ca.finance.yahoo.com/news/Economy-cranking-new-jobs-capress-4268813369.html

By The Canadian Press

OTTAWA – The C.D. Howe Institute’s monetary policy council recommended Thursday the Bank of Canada raise its target for the overnight interest rate.

The group of economists recommended the central bank raise the key rate by a quarter point to 1.25 per cent at its rate announcement next week.

Bank of Canada governor Mark Carney is expected to keep rates on hold at one per cent when the announcement is made July 19.

“The principal theme of the group’s discussion was the contrast between the Canadian domestic scene, which most attendees felt justified a more restrictive stance by the Bank,” the think tank council said in a statement.

However, the recommendation by the mix of private sector economists and academics was not unanimous.

Five members of the panel recommended the increase, while four others suggested the Bank of Canada keep the rate at one per cent.

The bank last hiked interest rates in September 2010.

“Looking abroad, participants generally agreed that the potential negative impact on global growth and on financial conditions in Canada and elsewhere of sovereign debt defaults was enormous, but they differed in their views about how the Bank of Canada should respond to this prospect,” the council said.

“Some argued for more accommodative policy on the grounds that inflation expectations are well anchored and the Bank should support domestic demand. Others stressed the risks of postponing needed tightening for too long in preparation for events that might not occur. “

The group was unanimous though in their recommendation that the rate, which is at an exceptionally low level, needs to rise over the coming year.

The central bank will make its decision next week as the U.S. and global economy present an uncertain future. Even as the Canadian economy appears on track, weakness in the U.S. and threats of sovereign debt defaults threaten the outlook.

Speaking to a Senate committee last month, Carney warned that the U.S. economy is a shadow of its former self and a mountain of debt weighing on the balance sheets of advanced countries around the world will dampen growth for years.

Carney told the committee that the second quarter in Canada could see growth drop all the way to the one per cent range, from 3.9 per cent in the first three months. http://ca.finance.yahoo.com/news/C-D-Howe-Institute-monetary-capress-3527802669.html

By The Canadian Press

OTTAWA – Canadian home prices continued to soar above year-ago levels in June, but economist believe price hikes could soon ease, spelling relief for buyers in expensive markets like Toronto and Vancouver.

The Canadian Real Estate Association said Friday the national average price for Canadian home resales was $372,700 in June, up 8.7 per cent from the same month last year, but down 0.9 per cent from May.

Realtors sold 48,487 resale homes last month, 10.8 per cent more than in June 2010, when sales began to taper off from an earlier hot streak when buyers rushed to beat interest rate hikes. Last June, the Bank of Canada raised interest rates from emergency lows for the first time since the recession.

Last month’s sales activity was also 2.6 per cent higher than in May, bucking a four-month trend of monthly declines.

“Canadian housing demand remains resilient, thanks to low interest rates, job growth, and home buyer confidence in the economy,” CREA president Gary Morse said in a statement.

June’s double-digit year-over-year sales increase was the fastest pace recorded since April 2010, said Bank of Montreal economist Robert Kavcic.

“However, the strong growth figure somewhat masks more moderate recent activity, as sales fell more than 16 per cent between April and June last year amid stricter mortgage rules, making for an easy comparison,” he wrote in a research note.

Despite the year-over-year price hikes, seasonally-adjusted prices have now dipped for three straight months, suggesting the changes to mortgage rules that limited the maximum amortization period “might be having at least a modest impact on pricing,” he said.

Some industry watchers have speculated that prices have now peaked and expect to see declines, especially when interest rates inevitably rise.

“Stricter mortgage rules and declining affordability appear to be taking at least some momentum out of prices, a trend that could continue if the Bank of Canada resumes its tightening campaign in the fall,” Kavcic said.

Sonya Gulati, an economist at TD, said June’s figures suggested a pickup in activity after a “particularly muted” over the past few months, but added that they could be a blip.

“We expect the mini reprieve to be fleeting and in turn, sales gains should be muted for the remainder of the year and into 2012,” she said.

Gulati said she expects prices to decrease by 10 per cent over the next two years, accompanied by a 15 per cent decline in sales.

“The lag between sales and prices usually comes in between two to three quarters. In turn, we anticipate prices to temper early next year,” she said.

Sales picked up in a majority of the country’s cities, with two notable exception — the pricey and once overheated markets of Vancouver, down 1.7 per cent and Toronto, 0.4 per cent lower.

In Toronto, average seasonally adjusted home prices fell 1.1 per cent, but are still up nearly 10 per cent year-over-year. The market remains one of the most competitive in Canada as demand so far this year has far outweighed the number of listings, contributing to higher prices.

In Vancouver, average prices are about 23 per cent higher than they were last year, but the average is being skewed higher by a flurry of activity at the high end of the market. Sales in expensive West Vancouver and Richmond have eased since February, which helped to reduce the impact on average prices, CREA noted.

That area has recently been a hotbed of housing activity, and high end sales helped drive June average home prices in Greater Vancouver to $630,921.

However, the national figures in June showed less of an impact from the sales of high-priced homes in Vancouver, although that city continued to skew the national results, CREA said.

About 60 per cent of local housing markets in Canada were balanced in June — meaning the number of sales and new listings were about the same. However, new listings increased just marginally, by 1.8 per cent in June from May.

Calgary, Montreal, Ottawa, Hamilton, London, Ont., and Victoria all saw gains over May.

Nevertheless, national sales activity in the second quarter (April, May and June) was down 4.5 per cent compared with the first quarter of 2011.

CREA attributed the decline from the first quarter to new mortgage rules announced in January and implemented at the end of March and an increase in mortgage rates in April and May.

CREA’s monthly report comes ahead of Tuesday’s Bank of Canada announcement on its target overnight interest rates. The central bank is widely expected to keep the key rate unchanged at 1.0 per cent, where it has been since September .

Earlier in the year, economists had expected the Bank of Canada would begin raising its short-term rate to quell inflation. However, sentiment has changed amid signs that the U.S. economic growth has been less robust than expected.

In contrast with the United States, Canada’s job growth has been stronger, its federal government is making more headway in dealing with budget deficits and its resource exports are relatively strong — putting home buyers in good shape.

“The Canadian housing sector remains on a solid footing,” said Gregory Klump, CREA’s chief economist.

“The rise in monthly home sales activity at the end of the second quarter, upbeat business sentiment and hiring intentions, and signs that the Bank of Canada is in no rush to raise interest rates bode well for home sales activity and prices going into the second half of 2011.” http://ca.finance.yahoo.com/news/Home-prices-remain-sky-high-capress-1260466279.html?x=0

Residents of a downtown Edmonton condominium believe better provincial regulations could have prevented them from having to pay $2.2 million to fix problems they say were caused by the developer.

The owners of decade-old Rossdale Court condominiums have spent the last four years fixing problems with pedways, balconies and window seals which are related to water leakage.

“It is pretty disheartening,” said Lynn Yakoweshen with the Rossdale Court Condo Association.

“I bought in this building because it’s a beautiful location, it’s a wonderful neighbourhood, a great sense of community … like kind of an isolated oasis, Unfortunately if you look around it hasn’t been quite the oasis that I had hoped.”

The owners of the building’s 69 units have each spent between $28,000 to $40,000 on repairs, Yakoweshen said. The balconies needed restoration work and the building’s exterior stucco had to be completely replaced.

“All of your savings are depleted,” she said. “We’re very loathe to open emails because you wonder, ‘what now?'”

Liberal MLA Laurie Blakeman blamed the provincial government for the situation. She said building codes are insufficient and fines too low to be a deterrent. She said the current one-year warranty period doesn’t help homeowners.

“Most problems turn up at the five, six-year mark and there’s no protection for that,” she said.

The province plans to take measures which include increasing fines for building code offences but Blakeman said the province hasn’t set a timeline for when those changes will come into effect.

The Rossdale Court condo owners say they have had no luck suing the developer. Yakoweshen said the building was built under a company name that no longer exists.

“We have no legal recourse,” she said.

Blair Hallet is the developer of Rossdale Court and Glenora Gates, another condominium now under repair because of water leakage problems.

Hallet could not be reached for comment Wednesday. A staff member at Tessco, where Hallet is listed as a director, said he now lives in British Columbia. http://ca.news.yahoo.com/condo-owners-stuck-2-2m-repair-bill-004324886.html

For drama, it might seem difficult to top the past couple of weeks on Capitol Hill, but the debt ceiling debate in the United States is really only the opening act of a long-running production. The Obama administration and Congress will eventually have to agree to some watered-down measures that will enable an increase to the debt ceiling, to ensure that the country’s creditors continue to be paid on time. However, the necessary deal between the White House and House Republicans will be a political deal. It will only put off the tough economic and policy decisions to another act of this drama.

The fundamental problem facing the U.S. federal government is bringing taxes and spending into balance over the long run. Even if sustained growth is fully restored, Washington will be taking in the equivalent of 15% of gross domestic product as revenue, but spending 20% of GDP. If the budget is ever to be rebalanced, the U.S. federal government will have to tackle structural factors.

The United States is currently spending about 5% of GDP on defence and homeland security, compared with around 3% before 9/11. Social Security — long the “third rail” of U.S. politics — has a huge unfunded liability, and aging demographics will have a major impact on other social spending entitlements if unchecked. Yet, large cuts to defence and social spending are unlikely to be enough. Increases in taxes, combined with fundamental program redesign and a reduction in benefits, will eventually be required.

The medium-term fiscal plans brought forward by Republicans and by the White House currently fall well short of fiscal sustainability. The Republicans are ready to slash spending but unwilling to consider tax increases, while the Obama plan relies too much on sustained economic growth to reduce future deficits. A third option, from a President-appointed bipartisan panel, proposed a broad mix of spending cuts and revenue measures, but there has been little political takeup so far. Initially, tax hikes will affect wealthy Americans. But there is a limit to how much tax revenue can be raised by hammering rich people. At some point, tax reform will have to hit the broad swath of Americans. Some of the targets could include the elimination of popular but costly incentives such as deductibility of mortgage interest payments. Even these measures, however, will probably still fall short. Eventually, we expect the United States will have to do what Canada and other rich countries have done — implement a value-added sales tax.

Republicans, and even some Democrats, may well threaten to fight to the last breath before ever agreeing to it, but the merits of a sales tax are unmistakeable: It provides stable revenues, it affects almost all of the population, and it has the least impact on business investment. And as Canada found out in the 1990s, a value-added tax is a prolific generator of revenue, which the United States desperately needs.

The United States may already be in the midst of a “lost decade” due to the 2008 financial crisis, and the debt ceiling debate — suspenseful though it is — could be but a prelude to something much more dramatic. If international and domestic bondholders ever decide to stop buying new U.S. government bonds to fund the chronic fiscal deficits, the politicians won’t have much choice. The hard laws of economics will eventually force even the United States to face fiscal reality.

Canadians have a lot riding on the outcome of the current debate, due to our deeply integrated economies. As the U.S. goes through a difficult period fiscally and economically, Canadian businesses must re-double their efforts to adapt, innovate, diversify their sales, and internationalize their business model if they are to remain globally competitive. But Canada must also remain fiscally responsible to help offset the potential shocks ahead, so that a lost decade for the United States does not become a lost decade for Canada as well.

Glen Hodgson is senior vice-president and chief economist of the Conference Board of Canada. Kip Beckman is principal economist at the Conference Board of Canada.