In this week’s ATB Economics Weekly Wrap…

• Women at Work - part three
• Cautious optimism - the ATB Boardroom Sentiment Survey
• Alberta home prices - on the rise
• Housing starts - a better second half
• Alberta consumers - resilient, but fatiguing
• U.S. inflation - cooperating for now
• Next week: Canadian inflation
• Chart of the Week: Female participation rates by family type

In addition to part three of our Women at Work series, this week's Wrap includes analysis of a recent ATB Boardroom Sentiment Survey, our ATB index of consumer spending and the latest on housing in Alberta.

Women at Work part three: Female participation rates in Alberta

With Women's Entrepreneurship Day coming up on Sunday (November 19), we have been profiling trends related to women in the Alberta labour force and business sector. In part one of the series, we focused on employment growth and employment by industry. In part two, we looked at self-employment and business ownership. Today, we unpack the latest trends in female participation rates.

The labour force participation rate is a measure of how engaged the population is in the workforce. More specifically, it represents the number of individuals working or actively looking for work as a share of the working-age population (15 years+).

Alberta has a high participation rate—higher than any other province. This reflects a younger working-age population and higher participation rates among those aged 45+ (see the chart below).

The gap between male and female participation rates has closed significantly since the 1950s in Canada (our chart with comparable provincial data starts in 1976). Looking at the longer-term trend, Statistics Canada notes that “women began increasing their presence in the labour market as social norms regarding gender roles evolved, new technologies such as electrical appliances reduced the time needed to perform household chores, families had fewer children and employment opportunities in the service sector increased.”  

Flexible work arrangements and access to affordable childcare can also play a role. See the Chart of the Week for a closer look.

Alberta’s female-male participation rate gap has converged closer to the national average. This reflects a combination of declining male participation rates and relatively steady female participation rates. During the oil and gas boom of the mid to late 2000s, there was a jump in male labour force participation in Alberta—at one point hitting over 81% (nearly 9 points above the national average). Male participation stayed elevated during the 2011-2014 economic expansion, but has been trending lower since the 2015-16 recession (easing to 4.4 points above the national average in 2022).

Older Canadians, on average, have a lower participation rate. This means the overall participation rate tends to decline as the population ages. To help remove ‘aging effects’, we look at the population in their prime-working years (25-54) over a ten-year period.   For this age group, the female participation rate in Alberta has risen from just under 82% in 2013 to over 84% in 2022, while the male participation rate has held at just over 93%. As such, the decline in the overall male participation rate over the period reflects a drop in the youth (15-24) and 55+ age cohorts.

Near-term headwinds; medium-term cautious optimism

Canadian businesses expect the economy to go through a rough patch over the next six months, but are generally optimistic about their medium-term prospects. That optimism is felt more strongly in Alberta.

New survey results from the ATB Business Boardroom Sentiment Survey show that Canadians businesses widely expect a market slowdown in economic activity in the near term, with 71% expecting a Canadian recession over the next six months (we’re getting close to a ‘technical recession’ as we discussed last week). Higher interest rates are a major factor, with 89% saying it has impacted their business.

The further out Canadian businesses look, the more optimism increases. The share of businesses saying they are very or somewhat optimistic increases from 65% over the next 12 months to 73% over the next five years. Alberta businesses have much more optimism over the next five years, with 83% reporting some degree of optimism.

Alberta housing market - lower sales, higher prices

Alberta posted its first dip in unit sales since February. However, market conditions remain tight and prices continue to march higher.

Alberta home sales took a step back last month (down 8.6%)—the first drop in eight months. Up until last month, Alberta home sales had been bucking the national slowing trend.

Despite the dip, the resale market remains relatively tight. The inventory of homes sits at 2.7 months of supply (vs 4.1 nationally) and the sales-to-new-listings ratio is 67.7 (vs. 49.5 nationally).

Alberta resale prices, as measured by the MLS composite benchmark, continued their ascent. They hit a new record of $490,500 (+7.2% year-over-year). Calgary has for some time been driving housing price gains in Alberta, but Edmonton has joined in. Prices have been rising in the capital city since May, though are still below their peak level reached in April 2022.

Despite rising prices, Alberta housing remains relatively inexpensive when compared to higher-priced markets in Ontario and BC—a major factor driving large inflows of migrants to Alberta from those provinces.

Housing starts - lower in October, but trending stronger

There has been a marked improvement in home construction in the second half of 2023 (so far, at least), as the sector continues to play demographic catch-up.

Alberta housing starts eased to a still-decent 40K (annualized rate) last month after hitting an eight year high of 49K in September. The pace of new home construction has quickened since the summer—42K starts on average since July compared to less than 30K in the first half of the year. Calgary has accounted for much of the improvement.

In this tug of war between higher interest rates (lower starts) vs. population growth (higher starts), it seems that the latter has gained an upper hand as of late. But many more homes will be needed to keep up with record migration. We expect a stronger year for housing starts next year.

Alberta consumers resilient

Our ATB Consumer Spending Index posted a sizable increase in October following a dip in September. Smoothing out the swings, however, shows a flattening trend. We expect this softness to persist through the first half of next year as higher interest rates continue to bite.

Alberta consumers have been resilient spenders this year, and it seems that they have a little more left in the tank. Our timely ATB Alberta consumer index, based on the value of ATB Mastercard transactions, posted a strong rebound in October. Rapid population growth and continued job gains are no doubt providing a lift.

However, the index is trending sideways (based on the three-month moving average), pointing to signs of consumer fatigue. Heading into 2024, rising debt servicing costs will force some households to cut back on more discretionary purchases.  We have already seen some signs that this is already happening in the retail numbers (September update coming next week): purchases of some more interest-sensitive items like furniture and electronics have eased this year. One exception is vehicle sales, which have held up well amid pent-up demand.

Threading the U.S. inflation needle

Equity markets cheered the softer than expected CPI reading, with hopes that the U.S. Fed will bring down inflation without major economic damage.

A couple good things happened in the U.S. inflation report for October. The annual rate of Inflation was less than expected (3.2% vs. 3.3% consensus) and the closely watched core reading (ex. energy and food) rose 0.2% month over month (vs. 0.3% expected).  According to the CME FedWatch Tool, the market sees no rate change at the next Fed meeting on December 13, with increased odds of a rate cut before the midpoint of next year.

But keep the champagne on ice. Chairman Powell last week said that the Fed “will not hesitate” to hike if necessary and the Fed will no doubt want to see more evidence that an easing core inflation trend continues to hold. Next month’s labour force report will be closely watched for more signs of cooling.

Next week: Canadian Inflation!

Canadian inflation moved in the right direction in September (4.0% to 3.8%) and we expect it to move even lower in October.

We anticipate that lower gasoline prices will help push down October’s inflation rate (see chart). We also look for continued slowdowns in grocery price inflation, potentially offset by momentum on rental inflation. Food and rents have switched spots, with the latter turning into a new inflation driver.

Looking beyond the headline rate, the question keeping the Bank of Canada up at night is whether the now stagnating economy will materialize into weaker ‘underlying’ price pressures. Recall the Bank revised up last month its inflation forecast for next year (from 2.5% to 3.0%). Soft ‘core’ inflation readings next week would reinforce our call for a continued pause extending well into next year.

Canadian inflation - looking  under the hood

New research shows what’s behind the recent saga of inflation in Canada.

Economists often talk about inflation being driven by demand (i.e. spending) and supply (i.e. input costs) forces. But how much can be ascribed to each force? To find out,  Professors Yu Chen and Trevor Tombe at the University of Calgary do a deep dive in an article published by the C.D. Howe Institute. They show that demand-related factors are largely responsible for the decline in the inflation rate, but that the persistence of remaining price pressures is largely supply related—namely housing and food prices.

Interesting Fact…The number of new women-founded start-ups with a valuation of more than US$1 billion (“unicorns”) in Canada has almost doubled since 2019. See The State of Women’s Entrepreneurship in Canada 2022 for more information on women entrepreneurs.

Chart of the Week:  Female participation rates by family type

Access to more affordable childcare and more flexible work arrangements appears to be contributing to higher participation rates for some groups of women. As the Business Council of Alberta has previously shown, there has been a particularly large increase in participation among women with a youngest child under five. More up-to-date information suggests that the participation rate among this cohort has averaged 76.8% so far this year, compared to 71.5% in 2019 (prior to the COVID disruptions).

This concludes the three part series on Women at Work, in collaboration with W by ATB.*

*W by ATB is powering possibility for women in business. W. Warrior. Worldly. Wise. Woman. W can represent a lot of different things, but for us, W is about supporting our business clients that are women business owners or leaders with expert financial advice and business industry expertise.

Daily trivia

Answer to the previous trivia question: The Women’s Entrepreneurship Day Organization was founded in 2013 by Wendy Diamond.

Today’s trivia question: Which province had the lowest labour force participation rate in 2022?