Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC economist Benjamin Tal tackled a problem needing much more attention – the shortage of construction workers,
“CMHC suggests that we will need an extra 3.5 million units by 2030 to restore affordability, and the province of Ontario is calling for a doubling in the annual pace of housing construction in the province to 150,000. And the reality is that, as big as those numbers are, the real gap is even larger … Even worse, the gap is growing with every day that passes without meaningful action… There are currently just under 1.6 million construction workers in Canada, representing almost 8 per cent of total employment, evenly split between residential and non-residential construction. That’s roughly 200K fewer workers than in the manufacturing sector. While the construction industry has gained almost 80K new jobs since the beginning of the pandemic, that advance was only moderately stronger than what was seen in the economy as a whole … With no less than 80k vacancies in the industry, the vacancy rate is at a record high … the industry is increasingly relying on new, untrained labour, which adds to the inefficiency issue, while safety is rapidly becoming a top concern … it’s likely to get worse. The Canadian labour market is aging and the construction sector is no exception. The share of construction workers over the age of 55 is now at a record high … Not only is the share of new immigrants in construction extremely low (2 per cent), but it has been trending downward over the past decade”
“If they come you will build it — Canada’s construction labour shortage (In Focus” – CIBC Economics
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Morgan Stanley U.S. equity strategist Michael Wilson has been bearish and wrong this year so far. In his weekly report, he doubled down in urging investor caution,
“Sentiment and positioning has turned outright bullish as both retail and institutional investor sentiment has reached its highest levels in over 2 years … However, given our fundamental view on growth, we find it hard to get on board with the current excitement and narrative supporting it. In other words, if second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct. If not, many investors may be in for a rude awakening given the very big reach for risk we are seeing … our view for weaker than expected earnings growth over the past year has been right – i.e.an earnings recession – the market and most investors believe we have reached the rate of change lows and will see accelerating growth from here. We respectfully disagree … The most troubling divergence remains in the strongest index, the Nasdaq, where cumulative breadth is showing one of the widest divergences with price we have ever witnessed… We expect the inflation surprise on the downside to have a directly negative impact on top line growth that is not in consensus forecasts”
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BMO economist Shelly Kaushik tracked changes in domestic household debt,
“Canadian household debt continued to rise in April, though the pace of borrowing decelerated yet again. Annual growth in mortgage loans stepped down to 5 per cent, continuing the decelerating trend that began when the Bank of Canada started tightening in March 2022. Mortgage demand may tick up as the housing market recovered in the following months; but, the return of tightening could dampen demand in the summer. Despite the slowdown in the pace of borrowing, near-record debt levels remain a key vulnerability for households. That could weigh on consumption, and broader economic growth, in the medium term”
With the housing market turning higher again, the near-term low for mortgage growth may be here.
“BMO: “Household Borrowing Slows, for Now”” – (research excerpt) Twitter
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Diversion: “Meta’s AI leaders want you to know fears over AI existential risk are “ridiculous”” – M.I.T. Technology Review
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