Edmonton Housing Bust

Today we’re going to take another look at demographics, and more specifically the pending wave of baby boomers into retirement. We touched on this last month, but just in regards to Alberta. Today we’ll do all the provinces and territories and see how they all stack up heading into the unknown.

The dotted line is the national average… so ones position relative to that line tells us how much better or worse off they are then the average province. We’ll start out east with the Atlantic provinces.

We can see they all chart fairly similar patterns. Typically below average levels of twenty somethings (likely having moved elsewhere looking for work), and conversely above average levels of fifty-somethings. This would suggest they’re probably going to get hit harder than most when the boomers start retiring en masse.

Now we’ll look at Ontario, Quebec and the various territories. I probably should have broke these up as the territories figures are more or less their own animal(s), but alas I wanted to cram them all into three graphs.

Ontario is the red line, and Quebec the blue, we’ll start with those two. Being by far the largest province it’s no surprise Ontario plots a line very close to the national average… and when it comes to boomers they’ll actually fare slightly better than average. Quebec also charts close to the national average, but a little above average once you get past 45 year olds, so they’ll feel the effects a little worse than Ontario.

Like I mentioned the three territories are their own animals. The Yukon appears to have the pattern most similar to the rest of the country, but has a very big spike of boomers. Relatively speaking both the NWT and Nunavut have very young populations, and see a very big drop off once they hit 50 and 40 respectively.

Finally we’ll look at the western provinces. We see a few interesting trends here. As we discussed last month, Alberta has seen a big influx of twenty-somethings during the economic boom, thus we can see a noticeably higher proportion of twenty- and thirty-somethings… which also causes a downward shift in the proportion of older people. But as we discussed in a follow up, those that moved here can be a fickle bunch, and can leave as quickly as they came.

Saskatchewan is another interesting case, where their levels of 30-50 year olds are noticeably low. One would suspect this is likely a result of the flip-side of the effect Alberta experienced, that being Saskatchewan having relative economic difficulties for much of the prior two decades and thus a fair number of their young people left and didn’t return. Of course Saskatchewan’s economic situation has took a real turn for the better in the last couple years, so it’ll be interesting to see how they chart in the future.

Now British Columbia, which while it has a reputation for attracting retirees, they seem to track remarkably like the national average. Of the Western provinces they appear like they’ll be hit hardest by the boomer exodus from the work force, but only slightly worse than the national average. And finally Manitoba, who don’t seem to go right up the middle of their Western cousins on the demographic front.

And this is a graph of the median age of the respective provinces. Whether it adds anything to this article I don’t know, but I prepared it, so here it is. We note the larger the wave of baby boomers present in the earlier graph, the higher the median age is. The Atlantic provinces are the oldest, followed by Quebec and B.C. whom we noted were both above the national average line when it came to boomers.

Then you Ontario and the western provinces below the national median age by varying degrees, Alberta coming in the lowest. Yukon is mixed in with the western provinces, but NWT, and Nunavut in particular, are drastically lower. Alberta has again been affected by the resent influx of young people looking for work, so if they start leaving we’ll soon find ourselves back in the range Saskatchewan and Manitoba are in currently (and Saskatchewan may actually shift lower depending on how their economy weathers the financial storm).

In any case, it will be interesting to see how the exodus of baby boomers plays out. The governments have enjoyed a steadily increasing population base of working age people for over fifty years… and that’s not just going to start to slow, but eventually it’s going to begin to shrink (in about 10 years). That these are also generally the biggest earners, and thus biggest tax payers, only adds to the discrepancy.

We’re going to see a significant reduction in tax revenue at the very same time demand for services will be increasing in a big way. Thus we’re on the cusp of a new paradigm, and one that is very different than what we’ve become accustom too.

We’re going to do something a little different today and take a stab at something I’ve been curious about for a long time, age demographics and the effect of baby boomers. I’ve also prepared a neat little graph the displays an interesting phenomena resulting from our recent economic boom here in Alberta.

This is something of a time lapse graph to show the progression of the ‘wave’ of baby boomers. We see the first big spike there on the 1971 plot at 24 years old (as well as the other plots at 5 year intervals), those were the ones born from July 1946-June 1947… whose conceptions appears to be not so coincidentally closely correlated with the end of WWII. I wonder why that would be?!

The wave of boomers subsided a bit after the initial rush, but after a couple years started climbing again and did not crest until about 15 years later. Those would be people that are between 45-50 years old today.

We see in the graph that over time the graph seems to shift lower. This is due to expanding population, and that it largely expanded outside the boomer generation. This is from factors like immigration, the ripple effect of their own offspring, and advances in technology and living conditions allowing people to live longer (median age has risen from 26 in 1971, to 39 today), reduced infant mortality rates (10.9/1000 in 1979, to 5.4/1000 in 2005), etc, etc.

What is also interesting to note is the reduced birth rate that started in the mid-90′s and has been very pronounced in the last decade (extreme left of graph, light green and blue lines nearest the bottom). This is probably due to societal shifts towards smaller family. We saw the initial drop off from the boomer generation that was at a certain level… then when they started having kids we saw something of a leveling off again as the echo generation were born… and now echo generation are having their own offspring and we seem to be seeing a second downward shift down and leveling as the generation twice removed from boomers arrive.

Some time in the future I’ll do a point discussing the macroeconomic effects of the exodus of baby boomers from the work force and into retirement, or more specifically, their move from being a crucial tax revenue base to increasing health care liabilities. Within that we’ll look at the individual provinces and see who should weather storm and who could get crushed by the retirement wave.

A time lapse graph for Alberta using the same time intervals looks very similar to the Canadian one, but I did notice one thing that I wanted to explore further. Upon further inspection and decreasing the intervals it was very noticeable even over just the last decade. This was the influx of young workers during our recent economic boom.

Keeping a close eye on the 20-30 age range we can see a very big bubble form seemingly out of nowhere. It was starting to protrude in ’04, then was very noticeable in ’06, and is now glaringly obvious in ’08. In fact as of ’08, 24 and 25 year olds were the largest demographic, even more plentiful then the peak baby boomers.

Now, before someone gets excited and starts pointing to that little bubble as the silver bullet in justifying our little housing bubble… bear in mind that entire bubble above the mean for 20-30 year olds only represents about 30,000 spread out over a province of 3.3 million. So while it looks quite impressive, we’re really just dealing with something much closer to a drop in the bucket than a whole new paradigm.

Considering the availability of jobs, this would typically be the age group you’d expect to see a spike in since they’re generally far more mobile (not established in careers, or tied down with family). It will be interesting to see this plays out over time, as they’re still young and can leave as quickly as they came should they be so inclined.

Some will no doubt set down roots and settle though, and I think we may already be seeing the effects of that on the extreme right of the graph as the birth rate is increasing (unlike the rest of the country where leveled out). Our little economic boom brought a migration boom, and with most of those being young adults we’re also starting to see a bit of a baby boom.