Economist says Canada ‘in period of adjustment’
High household debt and rising interest rates a concern, but jobs plentiful and opportunities abound, business breakfast crowd told
We’re mired in household debt, our homes are worth less and interest rates are on the rise. Yet, we keep spending because our jobs are secure and the economy is good. “This is definitely a period of adjustment,” said Business Development Bank of Canada chief economist Pierre Cleroux during a stop in Kelowna on Thursday.
“There are still concerns and risks, but there are also opportunities like never before in Canada.”
Cleroux’s presentation to a breakfast crowd of Kelowna Chamber of Commerce members covered a lot of ground and explained a lot of complexities.
For example, how can consumers be in record debt, yet still have a smile on their face?
“Yes, the consumer debt ratio is higher than ever at 170 per cent, but most of that debt is tied to mortgages,” said the Quebec City-based economist. “So, that debt is at least attached to an asset rather than trips to gamble in Las Vegas. But it’s still a concern. There’s always risk with debt.”
Plus, mortgage interest rates, which have been at historic lows for years, are starting to inch up.
“The Bank of Canada doesn’t want to get people in trouble,” said Cleroux. “That’s why increases are announced well ahead of time and are being increased gradually.”
These factors don’t seem to a be major concern with Canadians because jobs are plentiful and the economy continues to hum along.
The housing boom of the past four years has started to wane and home prices are slipping.
However, rather than putting the country and homeowners in peril, the slowdown simply marks a return to a normal, healthy, balanced housing market.
Meanwhile, there’s a labour shortage as more and more baby boomers retire and there aren’t enough younger workers to take their place.
This is both a good and bad problem to have. It’s good because it means exports are booming, the economy is good, employers are optimistic and people can more easily find good-paying jobs.
It’s bad because it could be a drag on the economy if companies can’t find workers and take full advantage of opportunities.
“Businesses will have to market themselves as good employers and offer more flexibility and pay to workers,” said Cleroux. “They will have to invest in technology and recruit young workers as well as convince some retirees to stay on part time.”
Baby-boomer entrepreneurs retiring is an unprecedented opportunity for existing businesses, according to Cleroux.
“More companies than ever before are for sale and changing hands in Canada,” he said. “Businesses that want to expand can buy another company and increase market share and revenues.” Kelowna is well positioned for the new economy. “The city has a desirable location and lifestyle,” said Cleroux.
“That attracts retirees as well as youth to work in the burgeoning tech industry, which is here because entrepreneurs want to be here. Kelowna is the rightsized city to attract workers and investment because it’s big enough to have everything but small enough to be cheaper than Vancouver and Toronto.”