Trying to get a handle on BC business conditions now is a little bit like nailing jelly to the wall.
The recent economic numbers look pretty good with employment and output both staying in positive territory and doing better than in Canada as a whole.
The unemployment rate, at over 7%, is higher than we might like, but still better than the national rate. The number of people working has been rising, with unemployment only staying high because better times are encouraging more people to enter the workforce. Problems of labour shortages are now just beginning to arise and, so far, only in very specific cases. For example, CP Rail is now very short of workers in the smaller towns in both BC and Alberta with 200 vacancies.
The BC list of major projects continues to grow as the number of new projects being added to the list exceeds in both in quantity and value those that are completed. Even though not all the proposed projects are firmly nailed down yet, this picture is very different from the post-Olympic falling off a cliff that some were forecasting.
To the great relief of all Vancouver and Lower Mainland home owners and to the great disappointment of baby boomers elsewhere who were hoping to retire here, housing prices seem to have stabilized in the metro areas of BC at levels not too far below what they were at their frenzied peak. This means that the net worth of households and individuals is back where it was before the last recession.
Retail sales (including new car sales) and wholesale trade are moving up, but not as strongly as they were in boom that preceded the last recession.
Finally, most small and medium sized businesses and professional practices are managing to keep busy and are optimistic about the future. This last point should be treated with caution. Operators of smaller businesses are almost always optimistic.
However, there is more happening in BC than the relatively good news outlined above. Tourism is one sector that has declined, with US visitors down about 5% and overseas tourists down 1%. After a brief up tick, lumber prices are soft again, seeing no signs of life yet in the US housing market. Though still basically healthy, prices for energy and other commodities have declined from their peaks. Those who deal with new stock issues or new housing developments are not being overwhelmed with work.
Apart from or maybe in spite of all the numbers, there has been a change in how people feel—the animal spirits that economists talk about that determines how we act. People and businesses are being more cautious now that markets are not continuously rising and few jobs are going begging. Families are being more careful and are thinking about saving rather than spending. Look for a very modest increase in back-to-school sales this year.
Businesses of all types and sizes are seeing their customers becoming much more price and value conscious. No longer can a supplier tell a customer or a client “good, fast, cheap—pick two”. People are learning from Wal-Mart, one of the biggest buyers as well as one of the biggest sellers in the world. In order for Wal-Mart to offer its customers the lowest possible prices, it must get the lowest possible prices from its suppliers and will examine suppliers’ books to insure that their costs and margins are such that they are earning just enough to be able to stay in business.
All purchasers, whether they are deficit-ridden governments, more cautious consumers or businesses that are themselves under pressure, are now sharpening their pencils to get the maximum value for the lowest price. Whether in construction or consulting, very competitive bidding is now the norm. Professions are not immune. Corporations are now questioning their law firms about the venerable institution of billable hours and seeking a more certain and cost effective way to get their legal work done.
It is no longer a seller’s market whether you are providing goods, services or your own time in a job. But there is still a reasonable market out there for the goods and services that our businesses can turn out if we are efficient and effective. Big and small organizations in BC and Canada are now getting back to business and showing how productive they can be. It was the lack of productivity and cost-effectiveness that has hindered Canada’s competitiveness in the past. Today’s market challenges and the positive way the business sector is responding to them should result in great increases in productivity and competitiveness in the future.
Posted by: Roslyn Kunin
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