I recently read two very interesting items on the North American economies of Canada and USA. Considering the economic outlook has been fairly timid recently, this news is welcomed with open arms.
First CNN Breaking News- “U.S. unemployment rate drops to 8.9% from 9%, lowest since April 2009. Economy adds 192,000 jobs in February.”
With many economists expecting a double dip housing recession in the USA (stats show it is already going down again) a drop in the unemployment rate is a great sign. Job growth or job market stabilization has a positive effect on the housing market, and is one of the key growth factors for the economy. Since the rate has gone down, it may be too optimistic to say that a recovery or stabilization in the US housing market is coming? This would be a positive sign of encouragement for our neighboring economy.
The second news item I recently read, comes from Canada. It is actually two positive signs for the economy. The first, is that Canada has raised its GDP growth out look for this year. The second, is that our economy grew the fastest in 2010 in over a decade.
With the Canadian currency trading above the US, many foresee this to continue. Historically the US dollar has been valued higher (1=1.59 at times), our exports to the US were cheaper, now that has changed. Exports are down, however the economy is being driven by a strong real estate market and stable employment has increased economic growth and GDP out-put of this year.
Why is our economy so strong, aren’t Canadians taking on record levels of debt? The answer is yes Canadians are taking on record levels of debt, however due to conservative fiscal and lending standards the average Canadian is equity positive. Most homeowners have around 60-70% equity in their homes. When they refinance and pull out money, it may actually be costing them less (debt consolidation or cheaper rates). With the 5 Big Banks controlling majority of the banking sector, our economy has weathered the recession fairly well.
Real estate has flourished in the past two years. With 2009 braking all sales volume records and 2010 having a jump in prices and being a sellers market things were very good. Even now from Jan 2010 to Jan 2011 home prices rose 4.5%, primarily driven by the Toronto and Vancouver markets. This has trickled down to other aspects of the economy and stimulated growth over the past few years. Let it keep going up.