2009: the current state of canadian family finances

8/14/2019 2009: The Current State of Canadian Family Finances

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f a m i l y f i n a n c e s

T Currn Saof CanadianFamily Financs2 0 0 9 R e R t

Roger Sauvopl arns Consuling


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About the Institute

T Vanir Insiu of h Family was sablishd in 1965 undr h paronag of Tir excllncis Govrnor Gn-

ral Gorgs . Vanir and Madam aulin Vanir. I is a naional volunary organizaion ddicad o promoing hwll-bing of Canadas familis hrough rsarch, publicaions, public ducaion and advocacy. T Insiu rgularlyworks wih businsss, lgislaors, policy-makrs and program spcialiss, rsarchrs, ducaors, family srvic profs-sionals, h mdia and mmbrs of h gnral public.

Te Current State of Canadian Family Finances is an annual rpor which moniors rnds in family incom, xpndi-urs, savings and db.

T opinions xprssd in his rpor ar hos of h auhor and do no ncssarily rc h viws of h VanirInsiu of h Family.

C rappor s disponibl n franais.

94 prom. Cnrpoin Driv awa, nario K2G 6B1

www.vifamily.ca


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T Currn Saof CanadianFamily Financs2 0 0 9 R e R t

Roger Sauvopl arns Consuling

f a m i l y f i n a n c e s


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TeCHNICL NOTe

W ar back again. Tis 11h annual rpor updas h currn sa of family and houshold nancs upo h yar 2009. T rpor xamins incoms, spnding, savings, db, and n worh across family andhoushold yps.

Familis ar h main focus of his rpor, bu h las daild Saisics Canada family incomindicaors only go o h yar 2007. (S appndix abls A and B) Mor imly informaion is availabl

for h oal prsonal scor and hs daa ar usd o provid many of h simas for all housholdsup o h yar 2009. Housholds includ boh familis and unaachd individuals. Abou wo-hirdsof housholds ar family housholds and, hus, h rcn rnds for housholds provid a gooddircional guid o wha is happning for familis.

For as of undrsanding and o mak h rsuls mor rlvan, mos masurs hav bn convrd oa pr-houshold or pr-family basis. Houshold numbrs for h yars 1990 o 2007 ar drivd fromSaisics Canada, Income in Canada, 2007. Houshold numbrs for 2008 and 2009 ar assumd ogrow a h sam prcnag ra as in 2007.

In his rpor, many dollar simas ar in 2007 dollars and, as such variaions ovr svral yarsrprsn changs in ral purchasing powr ar inaion. T rm ral indicas wha would havhappnd if hr had bn no inaion. Inaion is masurd using h Consumr ric Indx. Allmasurs incorpora updas and any rcn rvisions by Saisics Canada.

Much of h analysis rlas o h priod 1990 o 2009, wih mphasis on h im priod ha is labldso far his dcad or on h las yar availabl, dpnding on h daa sris. T yar 1990 waschosn as h bginning yar in ordr o highligh longr rm changs.

Almos all of h background daa coms from Saisics Canada.1 T auhor did many addiionalcalculaions. Any opinions, rrors and omissions ar h rsponsibiliy of h auhor.

Rogr Sauv, opl arns Consuling, can b rachd a 613-931-2476, email([email protected]), or a his wbsi (www.poplparnsconsuling.com).


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TbLe O CONTeNTS

HIGHLIGHtS F tHe 2009 ReRt - FeBRUARY 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

INtRDUCtIN -It has been quite a year 4

ARt Ne HUSeHLD ReCeSSIN ReALItIeS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5How conomiss dn rcssions, booms, rcovris and xpansions . . . . . . . . . . . . . . . . . . 5A h houshold lvl h rcssion is notovr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Houshold rcssion raliy #1 - employmn fll sharply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Houshold rcssion raliy #2 - Aggrga wags shrank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Houshold rcssion raliy #3 - N worh dippd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Houshold rcssion raliy #4 - Housholds cu back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Houshold rcssion raliy # 5 - Saving back in syl o say? . . . . . . . . . . . . . . . . . . . . . . . 10

Houshold rcssion raliy # 6 - Bankrupcis and arrars climb. . . . . . . . . . . . . . . . . . . . . . . 11

ARt tW tHe MeDIUM-teRM eRSeCtIVe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12A fw dirncs his im around . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Db loads coninu o xpand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Db o incom raio jumps again . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13N worh sill blow 2007 pak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Hous prics way ou of lin wih incoms a housing bubbl? . . . . . . . . . . . . . . . . . . . . . . . . 14Dcad of sagging savings followd by a dcad of db. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16ovry likly on h incras again . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

T richs gain an vn biggr pic of h incom pi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARt tHRee SeCIAL ReRt N SeNDING IN tHe 2000s . . . . . . . . . . . . . . . . . 21Sady growh in spnding unil 2008 hn a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21trnds by major group of xpndiurs Mdical car up h mos. . . . . . . . . . . . . . . . . . . . . 22expndiur growh - TFastest20and Slowest20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 car xpnss oupacs all ohr ims in h dcad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Child car in h hom rgisrs biggs dclin in h dcad. . . . . . . . . . . . . . . . . . . . . . . . . . 25

AeNDIX A - Avrag incoms of familis and unaachd individuals, low-incom gap and shar ofincoms ar ransfrs and incom axs in 1990, 2000 and 2007 in consan 2007$. . . . . . . . . 28

AeNDIX B - Familis and unaachd individuals wih low-incoms (povry) ar ransfrs andincom axs in 1990, 2000 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

AeNDIX C - Major componns of avrag n worh pr houshold basd on mark valu in1990, 2000 and hird quarr 2009 in consan 2007$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30


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HIGHLIGHTS O THe 2009 rePOrT ebrur 2010

Te recession came and a recoery now seems to be underway - T global conomy was hi hard. Cana-da was hi hard. Canadian housholds wr hi hard. I sms ha h conomy is now in a slow rcovry.evn so, many challngs rmain. Svral faurs will hlp shap h conomic oulook in Canada.

Inrs ras ar a rcord low lvls and ar likly o rmain hr for a las svral mor monhsbfor moving up again.

Govrnmn dcis ar a rcord high lvls wih ongoing dcis and growing db forsn forsvral mor yars.

Govrnmns will bgin o apply xi sragis o rduc dcis, and pull back on h monaryand scal lvrs. Tis will involv rising inrs ras, spnding cus, ighning morgag rms, andax incrass.

Households aced difcult recession realities - employmn fll sharply, aggrga wags shrank, nworh dippd, housholds hld back, and saving has com back in dramaic syl. Bankrupcis and ar-rars climbd.

Average debt loads climbed to $96,100 in 2009- In conras o pas rcssions, housholds coninud oborrow mor his im. T db o incom raio jumpd o a nw high of 145%. Undr on scnario, som1.3 million housholds could hav a vulnrabl or dangrously high db srvic load by h nd of 2011.

Housing prices likely in a bubble - Hous prics in cobr-Novmbr 2009 incrasd o abou$340,000, qual o 5 ims h avrag ar ax incoms of Canadian housholds. T long-rm avr-

ag is 3.7 ims. Highr inrs ras, possibl changs in morgag rms, mor nw lisings, and hralizaion ha currn prics ar unsusainabl may caus h bubbl o burs.

Te 2000s was a decade o debt while the 1990s was a decade o sagging savings -In h 2000s,assgrowh was lss han half h pac of h 1990s whil h growh in db was wic as rapid. T op-

posing rnds for asss vrsus db brough abou a much rducd growh in walh in h 2000s. T1990s wr a dcad of sagging savings.

Poerty on the rise and the rich get a growing piece o the pie - ovry lvls jumpd during ach of hlas wo rcssions and ar likly doing so now. nly h richs h of familis incrasd hir shar ofoal family incoms h rs go lss ovr h las wo dcads.

Special report on household spending in the 2000s decade - u of pock mdical xpndiurs far ou-pacd all ohr major groups of xpndiurs. A h daild lvl, p car grw h fass and child car x-pnss a hom dclind h mos. T rcssion conribud o a 6% dip in prsonal incom ax paymns.


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INTrODuCTION -It has been quite a year

T global conomy was in a ral mss whn w wr prparing h 10h annual rpor a yar ago. Trwas a frz in world nancial marks and banks wr vn afraid o lnd o hmslvs.

A ha im, h Bank of Canada in isFinancial System Review suggsd ha h global nancialsysm is xprincing is mos svr crisis sinc h 1930s.2 Many hav sinc labld h armah asT Gra Rcssion.

Bginning in arns in h middl of 2008, govrnmns and cnral banks vrywhr bgan o akconcrd acions o unblock h crdi marks and o provid simulus o sop or a las slow hconomic downfall. Canada was quick o follow sui on monary acions bu dlayd much of is scalsimulus unil h passag of h 2009 fdral budg.

Now a yar lar, h Bank of Canada in is Dcmbr 2009Financial System Review is cauiously op-

imisic, noing ha [a]lhough h uncrainy surrounding h global conomic oulook has dimin-ishd, i nvrhlss rmains lvad.3 Tis is cauious opimism.

f paricular inrs o radrs ofTe Current State of Canadian Family Finances is h Bank of Canadasconclusion ha, among v ky risks o h Canadian nancial sysm, only on has bcom mor pro-nouncd. Ta risk concrns houshold balanc shs in housholds ha coninu o ak on mor andmor db rlaiv o incom. Tis annual rpor has warnd abou his alarming rnd in prvious issus.

Many Canadians ar worrid abou hir db loads. A rcn Manulif Financial poll found ha pay-ing down crdi cards and lins of crdi is a growing nancial prioriy among Canadians.4 Abou 28%

pggd db liminaion as hir main goal, up from 24% a yar arlir, and marking a v-yar high.T scond prioriy is paying down h morgag, and h hird is saving for rirmn. Will Canadiansfollow hrough wih corrciv acions or is his jus wishful hinking?

T global conomy was hi hard by h rcssion. Canada was hi hard. Canadian housholds and fami-lis wr hi hard.

T conomy has clarly movd o h boom and a slow rcovry sms o b h consnsus oulook.evn so, many diculis and challngs rmain. So far, much of h rcovry has bn h rsul of gov-rnmn scal and monary simulus. T global conomy is sill waiing for h priva scor o play abiggr rol.

Ky faurs characriz h conomic oulook in Canada:

Inrs ras ar a rcord low lvls and ar likly o rmain hr for a las svral mor monhs.

Govrnmn dcis ar a rcord high lvls wih ongoing dcis and growing govrnmn dbforsn for svral mor yars.


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T Fdral and rovincial govrnmns, h Bank of Canada and CMHC (Canada Morgag andHousing Corporaion) will likly bgin o formula and apply xi sragis o rduc dcisand pull back on h monary and scal lvrs ha ar now in plac. Tis will involv hard choics,including rising inrs ras, spnding cus, ighning morgag rmsandax incrass.

Tr ar long yars of rcovry ahad.

PrT ONe HOUSEHOLD RECESSION REALIIES

How economists dene recessions, bottoms, recoeries and expansionsBfor looking a h impac of h rcssion on housholds, a fw dniions ar appropria.

From an conomiss prspciv, a technicalrecession is dmd o occur whn oal oupu, usually

masurd by GD and ohr major conomic indicaors, is clarly dropping and dos so for a las woquarrs in a row. Canadian oupu was in a downfall from h las quarr 2008 and ino arly sum-mr 2009. Ta was h recession. T cs of h rcssion on such hings as mploymn and familyincoms will lingr much longr.

Whn oupu sops falling, h conomy has rachd h bottom (chnically h trough). Signs ofgrowh ypically bgin o appar a h bottom. Ts signs did bgin o appar in summr 2009 andconinu o accumula.

T nx phas is calld h recoery and lass unil h conomy rurns o whr i was bfor h rcssion.

cobr 2008 was probably h oupu pak in Canada. Tus Canada will b in a chnical recoery unil hconomy gs back o ha lvl. Tis could ak svral quarrs or yars and h pah is far from crain.

T las phas is calld an expansion and occurs whn h conomy grows byond h prvious pak.

Tis scion looks a h shor-rm rcssion raliis on individuals and familis a h houshold lvl.

At the household level the recession is notoverI is bcoming mor vidn ha a technicalrcssion has ndd and ha a technicalrcovry is undr-

way a h oal conomy lvl. Bu, no on should conclud ha rcssion worris ar ovr in h homsacross Canada. From a houshold prspciv, hr will coninu o b high unmploymn for somim, incom growh will rmain wak, and hr is an urgn undrlying nd for many familis orpair and/or srnghn hir houshold balanc shs. For far oo many, hr is oo lil incom, oomuch spnding, oo lil saving and oo much db.

Luckily, familis and individuals ar no rsraind by conomiss narrow dniions. Ty us hir


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own dniions and wha hy s and har around hm. According o 4,283 rspondns o a ollarapoll akn during h scond wk of Dcmbr 2009, 61% of Canadians fl ha Canada was sill inrcssion.5 Tis is a bi br han h 64% who said so a yar arlir, bu sill in sharp conras o only19% who said so in 2007. T sam survy found ha 60% fl h rcssion had a ngaiv impac onhir family. f hos who said i had a ngaiv impac, on in four said h ngaiv impac was major.

In his scion, h raliis of h rcssion a h houshold lvl ar prsnd in a sris of six chars.T chars covr h yars 2007, 2008 and includ h las informaion availabl for 2009. hr rcs-sion raliis ar xamind in a mdium o longr-rm prspciv lswhr in his rpor.

Household recession reality #1 Employment ell sharplyFor many popl, having a job, or no, is a vry prsonal indicaor of conomic hardship. T pak for

jobs was in cobr 2008 whn mploymn numbrs hi h all im high of 17,195,000. From h

pak o h boom in July 2009, on a n basis, ovr 410,000 jobs disappard. Sinc July, a hsianrcovr is undrway. T ollara survy nod abov found ha in Dcmbr 2009, 25% of rspondnssill blivd ha i was ihr somwha or vry likly hy or somon in hir houshold may loshis/hr job in h nx 12 monhs.6 Tis is no much br han h rading of 31% a yar arlir.

CHART 1 Total employment

J-

07

F M A M J J A S O N D J-

08


09

F M A M J J A S O N D

Source: People Patterns Consulting based on Statistics Canada

thousands

17,300

17,200

17,100

17,000

16,900

16,800

16,700

16,600

16,871,000

17,195,000

Tr wr som clar losrs and winnrs. From h pak o h boom in July 2009, half of h joblosss wr among youh agd 15-24 as hir unmploymn ra rachd is highs lvl sinc 1977.Mn agd 25-54 saw abou 200,000 jobs vapora whil womn agd 25-54 los ovr 100,000 jobs. T

job winnrs wr womn agd 55 and up (+61,000 jobs) and mn in h sam ag group (+27,000 jobs).Many oldr workrs hld on o hir jobs in h fac of worsning nancial prospcs for rirmn.


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T ocial unmploymn ra was a a 30-yar low in cobr 2008 (6.2%) and jumpd o abou 8.5%by mid-summr 2009, and has rmaind nar hr. An alrna unmploymn ra (which includsdiscouragd prsons who hav givn up looking for a job plus hos waiing for rcall and hos working

par-im unil a full-im job bcoms availabl) incrasd o almos 12% in July from lss han 9% incobr 2008.

T numbr of unmployd was sill a a saggring 1.6 million in Dcmbr 2009 compard o only1.2 million in cobr 2008.

T numbr of popl rciving mploymn insuranc chqus in cobr 2009 sood a ovr 800,000and was 62% highr han a yar arlir. Many of hs hav sn hir paymns xpir wihou havingfound a nw job. Many ohrs who did los hir jobs nvr qualid o collc. T srss has or will

worsn for hs unmployd prsons.

Household recession reality #2 - Aggregate wages shrankAggrga wags and salaris (h oal wag pi) arnd by all workrs wr incrasing a an annual raof 6% o 7% during much of 2007 and ino 2008. Tis was du o growing job numbrs, rspcablhours and modra incrass in wags pr workr. A h pak in cobr 2008, aggrga wags andsalaris wr sill 5% abov h prvious yar. Tn h rcssion hi and h slid bgan. By mid-summr2009, h incrass had urnd ino dcrass of abou 1% rlaiv o h prvious yar.

ay hiks, as masurd by avrag wkly wags and salaris, also dclrad sharply bginning in No-vmbr 2008. By April 2009, h annual incras had shrunk o only 1% and holding. evn his 1% mayno b susainabl as wag slmns in h priva scor in Spmbr 2009 wr only half of wha

hy wr a yar arlir.

rior o h rcssion and h job losss i naild, hr was widsprad concrn abou labour shor-ags, paricularly wihin h businss communiy. Tis is no longr h cas.

A Bank of Canada quarrly survy asks rms whhr a shorag of labour is acing hir abiliy om h dmand from hir cusomrs. During h hird quarr 2008, som 36% of rms indicadha hy had a labour shorag. Tis plungd o only 7% in h fourh quarr 2009, h lows radingsinc h survy sard in 1997.

Dmand will nd o pick up sharply bfor signican progrss is mad in rducing unmploymn andslowing h downward rnd in wags.

Tr is a posiiv sid o his rcssion. Inaion, as masurd by h Consumr ric Indx, dippd inongaiv rriory during much of 2009. evn so, h cor inaion ra (xcluds volail ims such asfrui, vgabls and gasolin) coninud o incras wihin h 1% o 2% rang during much of h yar.


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2

3

4

5

67

8

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F M A M J J A S


%

-1.0%

+5.0%

CHART 2 Total wages and salaries earned by all workers combined - % change from previous year

Household recession reality #3 Net worth dippedMany familis and individuals hav gon hrough agonizing priods ovr h las fw yars. Many, whoonc fl rich suddnly fl poor, or fl ha hy wr no as rich as you hink as hir walh plum-md. T dclin and incrasd volailiy in n worh is of gra concrn o many sniors and nar-sniors ha ar rlying on hir invsmn porfolios o suppor hir rirmn.

80

85

90

95

100

105

110

115

07Q1 Q2 Q3 Q4 08Q1 Q2 Q3 Q4 09Q1 Q2 Q3


Residential structures

Net worth

Shares

CHART 3 Aggregate value of selected household wealth in current dollars (index 2007 1st quarter = 100)

T oal n worh or walh of h prsonal scor hi $6 rillion dollars a h nd of h scond quarr2008. I hn dippd o $5.4 rillion by h nd of March 2009, a fall of 10%. N worh rcovrd abouhalf of h dclin by h nd of Spmbr 2009 and improvd furhr in h fourh quarr 2009.


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Much of h dip in n worh was causd by h sp dclin in h valu of shars, ha droppd byalmos on-quarr in valu bwn h nd of h scond quarr 2008 and h nd of h rs quarr2009. Tis was followd by a 15% rcovry by h nd of h hird quarr 2009, wih furhr improv-mns sinc hn.

T drioraion in n worh would hav bn much wors had h housing mark movd in lin wihh conomic fundamnals ... i did no. Housing may hav nrd a bubble markd by rapidly scalaing

prics. A rcn Nanos Rsarch survy found ha Canadians ar six ims mor likly o say h valuof ral sa in hir nighbourhood will gain in h nx six monhs han hy say i will fall, wih 46 prcn of rspondns saying hy xpc prics o incras.7 (S char 10 for mor on hous prics.)

Household recession reality #4 - Households cut backGivn h downurn in h conomy, in jobs and in wags, i should com as no surpris ha housholds

cu back on hir spnding. Rail sals plummd by abou 8% from hir Spmbr 2008 pak oDcmbr 2008. Spnding has bn on a slow, rraic, rcovry sinc hn. Rail sals in cobr wrsill down by 2% from h prvious pak. Som of his spnding was nancd by mor db.

$32.5

$33.0

$33.5

$34.0

$34.5

$35.0

$35.5

$36.0

$36.5

J-

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08


09

F M A M J J A S O


October 2009 sales were

down by 2% from the

September 2008 peak

Billions

CHART 4 Retail sales in billions of dollars - Seasonally adjusted

T spcial rpor in ARt tHRee provids a mor comprhnsiv look a h divrgn prsonalspnding parns ovr h 2000 o 2008 priod and during h rcssion yar from h hird quarr of2008 o h hird quarr of 2009.


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Household recession reality # 5 Saving back in style to stay?n of h mos sarling faurs of h rcssion has bn h hug push o highr savings. Frugaliymay b back in syl. Ls hop so. Many familis nd o mainain his frugaliy for much longr o r-sor hir frail nancial siuaions. Tis is impossibl for hos who, vn now, can only aord h basicncssiis of lif.

Tis savings bing sard arly in h rcssion, as h acual numbr of dollars savd jumpd by 178% inh fourh quarr 2008 (h rs quarr of rcssion) ovr h sam quarr a yar arlir. Much of hisrcd h panic fl by familis and individuals as jobs disappard, incoms shrank, and n worhdclind. Yar ovr yar growh in savings modrad somwha ovr h nx hr quarrs, bu vnso, housholds wr saving 50% mor in h hird quarr 2009 han hy did a yar arlir. Tis has bngood for prsonal bank accouns and a sns of family scuriy bu much mor sill nds o b don.

Bfor h rcssion sard, h prsonal savings ra was abou 2% and has now mor han doubld onarly 5% during h las four quarrs. Tis is a hug shi in aiud and bhaviour by housholds. T

criical qusion is whhr or no familis and individuals ar convincd, scard nough, and/or pru-dn nough o prmannly rvrs h ngaiv saving rnds of h las wo dcads.

Whil som housholds ar saving a lo mor, ohrs ar incrasing hir db loads. Som may b doingboh. T growh in houshold db coninus o advanc a a pac of 7% o 8% rlaiv o h prvi-ous yar. Tis has bn h cas sinc sinc arly 2008. Tis incras in db and h dclin in incoms

pushd h db o incom raio o a nw rcord high of 145%.

-100

-50

0

50

100

150

200

250

07Q1 Q2 Q3 Q4 08Q1 Q2 Q3 Q4 09Q1 Q2 Q3

Source: People Patterns Consulting based on Statitics Canada

+50%

Huge year to year increases in savings

Moderate to huge year to year

declines in savings

+178%

%

CHART 5 Personal sector savings in dollars - % change from previous year


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Household recession reality # 6 Bankruptcies and arrears climbT rcssion has bn spcially hard on many popl who ow mony or who hav vry lil monyo bgin wih. A Dcmbr survy by Ipsos Rid found ha 26% of rspondns arning lss han$30,000 pr yar said h rcssion acd hm a lo, compard o 18% for familis making $30,000 o$60,000, and o only 15% for housholds arning ovr $60,000.8

T numbr of consumr insolvncis was up by 26% (3-monh moving avrag) in cobr 2009 froma yar arlir. T yar o yar incras had bn as high as 42% in mid-summr 2009.

Dlinquncis ros. Morgags hld by charrd banks, which ar 90 or mor days in arrars, wr up byovr 50% in cobr from a yar arlir. Visa and Masrcard crdi card holdrs, who wr dlinqunfor a las 90 days, wr up by ovr 40% in July from a yar arlir.


%

Mortgages in arrears

3 months or more

Consumer

insolvencies

(3-month averages)

+52%

+26%

CHART 6 Mortgage arrears and consumer insolvencies - % change from previous year

-10

0

10

20

30

40

50

60

70

J-

07


08


09

F M A M J J A S O


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12 |

PrT TWO HE MEDIUMERM PERSPECIVE

A ew dierences this time aroundT currn rcssion has som of h markings of h las rcssion. During h las rcssion in harly 1990s, houshold incoms fll and spnding fll. Tis has happnd again. (See Chart 7)

T dirnc his im around was occurrnc ofboth a rapid jump in savings and coninud growh inprsonal db.

Ar h popl doing h xra savings h sam popl who ar aking on h addiional db? Ar hydirn groups? I is no clar, and h answrs will no b known for svral yars, if vr.

Tr ar indd a lo of popl in Canada who hav h abiliy o sav mor and/or cu back on discr-ionary spnding. Ty hav likly hld on o hir jobs hroughou h rcssion (ovr 90% of labour forc

paricipans ar sill mployd), vn if hy probably los som of hir walh ovr h las yar or so.

Tr ar many ohr popl who do no hav h luxury of ihr saving mor and/or cuing back.Many liv pay chqu o pay chqu and ar using crdi as a scuriy blank. In im, many accumulamor db han hy can handl. A Spmbr 2009 survy by h Canadian ayroll Associaion foundha 59% of Canadian mploys rpor ha hy would hav roubl making nds m if hir paychqu was dlayd by vn on wk.9

$ 4 8 , 0 0 0

$ 5 0 , 0 0 0

$ 5 2 , 0 0 0

$ 5 4 , 0 0 0

$ 5 6 , 0 0 0

$ 5 8 , 0 0 0

$ 6 0 , 0 0 0

$ 6 2 , 0 0 0

$ 6 4 , 0 0 0

$ 6 6 , 0 0 0

$ 6 8 , 0 0 0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09Q3

S o u r c e : P e o p l e P a t t e r n s C o n s u lt in g b a s e d o n S t a t is t i c s C a n a d a

$

Average income

$ 66,200

$ 59,700

$ 63,000

Savings

Average spending$ 52,000

CHART 7 Average income after transfers and income taxes vs spending per household in constant 2007$

Tr is on group ha has clarly akn on addiional db. Ts ar young rs-im hom buyrs.Many in his group hav rcnly assumd high raio morgags a rcord low inrs ras and wihlong amorizaion priods. Will hy b abl o aord hir monhly paymns whn inrs ras goup? Many ar alrady having problms. T survy nod abov found ha abou wo-hirds of hos


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2 0 1 0

agd 18-34 would b pinchd if hir pay chqu was dlayd by vn on wk. Many of hs ar hrs-im hom buyrs.

Debt loads continue to expandT avrag db pr houshold hi $96,100 in h hird quarr 2009 or $87,200 if only consumr db

and morgag db ar includd. Boh ar a nw rcord highs. toal db pr houshold advancd 5.7%in ral rms during h las yar. (S appndix C.) In h las yar, consumr crdi advancd by 7.5%

pr houshold whil morgag db advancd by 6%. hr db hld mosly by unincorporad busi-nsss, which ar par of h houshold scor, acually dclind. Tis suggss ha small businsss mayb having som diculis accssing crdi.

$35,000

$45,000

$55,000

$65,000

$75,000

$85,000

$95,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09Q3


Total household debt

(consumer debt, mortgage debt and "other")

Consumer debt plus

mortgage debt only

$96,100

$87,200

$54,200

$46,900

CHART 8 Average debt per household in constant 2007$(average includes households with debt and those without)

Debt to income ratio jumps againT db o incom raio movd up o 145% a h nd of h hird quarr 2009. Tis is anohr nwrcord. (S appndix C.) Givn h rnds vidn in h rs par of 2009, h Bank of Canada si-mas ha his raio could b up o 160% by h nd of 2012.10 Tis raio has bn found o b a kydrminan of prsonal bankrupcis.11

A mor prcis indicaor of h burdn of db has bn dvlopd by h Bank of Canada. In h hirdquarr 2009, abou 6% of all Canadian housholds (abou 825,000 housholds) had a DSR (Db SrvicRaio) ha xcdd 40%. T DSR masurs h prcnag of gross incom spn on houshold db plus

paymns on h principal. Ts high DSR housholds ar in a vry vulnrabl posiion and h Bank ofCanada modl assums ha on ou of vry four housholds in his siuaion will vnually dfaul.

T Bank of Canada crad wo scnarios o s wha prcnag of housholds would b in hisvulnrabl siuaion givn currn rnds in h db o incom raio, and if h avrag cos of borrow-


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14 |

ing incrasd by h nd of 2011. In h rs scnario, inrs ras incras by abou half a prcnagpoin, and, in h scond scnario, hy incras by abou on prcnag poin.

Undr h rs scnario, hr would b abou 1.1 million housholds wih a high DSR a h nd of2011. Undr h scond scnario, hr would b approximaly 1.3 million housholds wih a high

DSR a h nd of 2011. Ts ar incrass of 30% or 50% from h hird quarr 2009 siuaion.

As worrisom as hs numbrs ar, h avrag cos of borrowing could asily incras by much morhan h prcnags assumd in hs wo scnarios. A wo prcnag poin hik could asily caus hnumbr of housholds wih his dangrously high DSR o climb o 1.5 million or so. Tis would rpr-sn an incras of abou 80% from h siuaion in h hird quarr 2009 in h numbr of housholds

wih a dangrously high DSR.

Net worth still below 2007 peakAs of h nd of h hird quarr 2009, h avrag n worh (oal asss minus oal db) pr hous-hold sood a abou $390,000 in consan 2007 dollars. Tis was down by approximaly 6% from h

pak of abou $416,000 in 2007. Ta is a subsanial dclin of $26,000 pr houshold. T dclinwas much dpr a h nd of h rs quarr 2009, bu was rducd by a rapid improvmn in sharprics and h rbound in hous valus.

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09Q3


$245,600

$390,000$349,200

$416,000

CHART 9 Average net worth (total assets minus total debt) per household in constant 2007$

House prices way out o line with incomes a housing bubble?Avrag hous prics in cobr-Novmbr 2009 incrasd o a nw high of abou $340,000. 12 Tis isqual o v ims h avrag ar ax incoms of Canadian housholds (all in currn dollars). Tis


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2009 | 15

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compars o only 3.2 ims in 2000 and an avrag of 3.7 ims ovr h wo dcads. Using his ma-sur, Canada may alrady b in a housing pric bubbl. And bubbls do burs a som poin.

3.0

3.5

4.0

4.5

5.0

5.5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09Q3


3.4x

incomes

4.7

5.0xincomesOct/Nov

3.6

3.2

ratio

CHART 10 MLS average residential selling price as a ratio of average household income after income taxes

Spculaiv buying sms o b playing a rol in pulling up prics. A Novmbr 2009 Royal Lpag sur-vy of 1,225 ral sa agns found ha 28% of h agns fl ha sals for invsmn purposs hadihr incrasd subsanially or somwha ovr h las hr monhs whil only 21% indicad hasals for invsmn purposs had dclind subsanially or somwha.13

Ral sa asss now compris 48% of h n worh of Canadian housholds and ar h highs in wodcads. A signican housing corrcion would clarly damag h balanc sh of many housholds.

Hous prics had corrcd for a fw monhs in la 2008 and arly 2009 bu ook o again. Amongsvral facors, h pickup rcs rcord low inrs ras and h lil rpord fac ha h Cana-dian govrnmn, via CHMC (Canada Morgag and Housing Corporaion), is now purchasing and/or insuring mos nw or rnwd morgags from banks. T saisics rval ha, ovr h las yar,ousanding morgags hld by banks hav basically bn a whil NHA (Naional Housing Ac)scuriizd holdings (hld by CMHC) ar up by on-hird and hus rprsn almos all of h growhin rsidnial morgags ousanding in h las yar. As such, h risk of falling hous prics is incras-ingly hld by h axpayr.

Wha migh happn if h avrag hous pric was only 3.7 ims (h wo dcad avrag) h avr-ag houshold incom ar incom axs? T hous pric would b abou $250,000 or back downo 2005 lvls. Tis $250,000 pric is 26% blow h cobr-Novmbr pric of $340,000. A quickrurn o h radiional hous-pric o incom raio would b vry dicul for popl who rcnly

purchasd a high prics.


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16 |

CMHC has dsignd an aordabiliy modl o hlp ponial buyrs calcula how much hous hycan aord.14 Tir modl is basd on gross incom, which is bfor paymn of incom axs. Wih agross incom of $86,200 (h avrag in h hird quarr 2009), a buyr could handl monhly mor-gag paymns of approximaly $1,500 plus $800 in monhly propry axs and haing bills. Tis oalmonhly paymn ($2,300) is qual o 32% of monhly gross incom ($7,180). A 32% guidlin has

radiionally bn usd as h bnchmark for a saf and consrvaiv morgag. hr dbs or lasingcoss could ponially bring h monhly paymn up o 40% of gross incom and sill qualify for hmorgag insurd by CMHC.

Using his modl, a ponial hom buyr, wih a gross incom of $86,200, wih a 5% down paymn,who borrows a 5% inrs, wih a 35 yar amorizaion priod could buy a hom worh $316,000 or7% blow h prics in cobr-Novmbr.

Now wha migh happn if morgag ras incrasd o 7.5%? Tis is a rasonabl assumpion givn ha inr-s ras on charrd bank 5-yar convnional morgags wr 7.5% as rcnly as Dcmbr 2007. Kping

all h sam assumpions, h buyr could only aord a hom worh $242,000 or 29% blow h cobr-Novmbr pric. Rising inrs would surly caus a downward pull on prics and inrs ras will ris.

Tr ar many ponial scnarios ha would also nd o da hous prics, including highr down pay-mn rquirmns or shorr amorizaion priods. T possibiliy of hs changs ar undr discussion.

hr analyss ar also bginning o worry abou a housing pric bubbl. A Dcmbr rpor by DavidRosnbrg of Gluskin Sh suggss ha housing valus ar anywhr bwn 15 pr cn and 35 prcn abov lvls w would labl as bing consisn wih h fundamnals.15 A fascinaing wbsihosd by Garh turnr, formr M and auhor of T Grar Fool is also raising srious concrns

abou high hous prics.16

T condiions ar in plac for a corrcion in hous prics; whn and by how much is h dicul qusion.

Decade o sagging savingsollowed bya decade o debtFrom a houshold and family nanc prspciv, how can w cagoriz h las wo dcads? Wrhs wo dcads dirn? Ys, hy crainly wr. Chars 11 and 12 us h saring and nding yarsof ach dcad o xamin changs in houshold incom, spnding, db, savings, asss, and n worh.Tr is a clar parn ha maks ach dcad uniqu.

From a houshold prspciv, h 1990s was a dcad ofsagging savings as annual savings plummd bywo-hirds bwn 1990 and 2000. Annual savings pr houshold collapsd from abou $7,700 in 1990o only $2,800 in 2000. T rahr small incras of 14% in annual savings in h 2000s was oally duo advancs in h las wo yars. (See chart 5)


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2009 | 17

2 0 1 0

T 2000s wasa decade of debt. In prcnag rms, db pr houshold advancd by 45% during h2000s - mor han doubl h 22% advanc in h 1990s. In ral dollars rms, avrag oal db prhoushold incrasd by abou $30,000 during h 2000s compard o a much smallr $12,000 duringh prvious dcad.

Boh h 1990s and h 2000s saw spnding pr houshold ris by abou 10%. In h 1990s, his in-cras was nancd by boh rising db and a sharp dclin in annual savings. In h 2000s, his spndinggrowh was paid for by a mods 10% advanc in incoms and soaring db (up 45%). Tis rnd wasmdiad by a posiiv urnaround in annual savings, ha occurrd a h nd of h priod.

-80

-60

-40

-20

0

20

40

60

% increase in incomes % increase in spending % increase in debt % change in

annual savings


1990 - 2000 2000 - 2009

+1%

+10% +10% +10%

+22%

+45%

-64%

+14%

CHART 11 Two decades of real change in incomes, spending, debt and annual savings per household

In h 1990s, ral ass accumulaion grw by 39%. Many of hs asss wr acquird using db andsom wr paid for by rducd annual savings. T nd rsul, on avrag, was a signican incras in

walh or n worh.

T 2000s wr much dirn. Ass growh was lss han half h pac of h 1990s whil h growhin db was wic as rapid. T opposing rnds for asss (dclining growh ra) vrsus db (incrasinggrowh ra) brough abou a much rducd growh in walh.


24/38

18 |

0

5

10

15

20

25

30

35

40

45

50

% increase in assets % increase in debt % increase in net worth


1990 - 2000 2000 - 2009

%

+39%

+17%

+22%

+45%+42%

+12%

CHART 12 Two decades of real change in assets, debt and net worth per household - % change during each decade

Poerty likely on the increase againT povry ra nds o mov up or down in rlaion o gnral conomic condiions. Tis was so dur-ing h rcssion of h arly 1990s: h povry ra for all prsons ros from 11.8% in 1990 o 15.2%in 1996, masurd by Saisics Canadas low-incom cuo ar incom axs. Subsqunly, h radclind fairly consisnly unil 2007 whn i fll o 9.2%. T 2007 povry ra was h lows ra r-cordd ovr h priod sinc 1976, whn hs daa wr rs availabl. (Appndix B provids addiionalinformaion on povry in 2007.)

7

8

9

10

11

12

13

14

15

16

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08F 09F

Source: People Patterns Consulting based on Statistics Canada LICO-IAT

11.8%

9.2%

%

11.9%

Poverty rate in 2009 if deterioration similar

to the average of the last 2 recessions

CHART 13 % of all persons in low income (poverty) after transfers and income taxes

T xac impac of h rcssion on povry for 2008 and 2009 will no b known unil h nw num-brs ar allid a fw yars from now. I is vry likly ha povry is alrady moving up. T xprinc of


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2009 | 19

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h pas wo rcssions has shown ha h povry ra coninud o ris severalyears ar h low poinin h conomy, wll ar h urnaround in sock marks and conomic growh.

If h povry ra in h currn rcssion mrly movd up, on avrag, in lin wih h pas wo rcs-sions, h ra could b xpcd o avrag 11.9% in 2009, ssnially back o whr i was in 1990.

Furhr incrass ar likly in 2010 and byond. A rpor by h Insiu of WllBing concluds ha[i] will mos probably ak many yars, possibly up o a dcad for povry in Canada o rurn o is2007 lvl.17

An arly indicaion of currn and fuur povry rnds may b found in h daa on food bank usag.In March 2009, h numbr of popl assisd by Canadian food banks was up by 18% from a yar ar-lir. Condiions hav worsnd sinc hn. A rpor prpard in cobr 2009 by h nario Associa-ion of Food Banks,In the Midst of the Storm: Te Impact of the Economic Downturn for Ontarios Food

Banks in 2009, rvald ha narios food banks ar undr prssur du o growing unmploymn,coninually incrasing food prics and rising dmand. Ty hav bn forcd o purchas mor food, and

in som cass raion h availabl supply of donaions.18

Condiions ar dicul on h hom fron.

Te richest gain an even bigger piece o the income pieWhil avrag family incoms hav risn ovr h las wo dcads, no all familis hav bndqually. T long-rm rnds ar fairly clar. T op h of familis of wo or mor go a biggr sharof all h incoms ar incom ax in Canada.

7.5

13.4

18.2

23.8

37.1

7.3

12.6

17.3

23.1

39.7

0

5

10

15

20

25

30

35

40

45

Poorest fifth Lower-middle fifth Middle fifth Upper-middle fifth Richest fifth


1990 2007

%

Each of the bottom 4 income groups lost a share of aggegate income pie

The richest group

was the only gainer

CHART 14 % distribution of after income tax incomes for families of 2 or more persons, 1990 and 2007

In 1990, h op h of familis ook in 37.1% of h incoms gnrad by all familis in h conomy.Tis incrasd o 39.7% by 2007.


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20 |

In conras, h shar of oal ar ax incoms dcrasd for each of h ohr four incom groups. Tsmalls loss was by h on h of familis ha alrady had h las. Ty garnrd 7.5% of h piin 1990 and 7.3% of h incom pi in 2007. T hr middl incom groups all los abou h sam

proporion of h oal incom pi.

hr masurs, such as h Gini cocin, rach similar conclusions, albi using a mor complxanalyical approach. Mor of h incom pi is going o hos ha alrady hav h mos.


27/38


28/38

22 |

toal houshold spnding incrasd vry yar from 2000 o 2008. Tr was a brak in h rcssionyar, as spnding was basically a from h hird quarr of 2008 o h hird quarr of 2009. toalspnding was mor sabl han was vidnc by h dclin in h rail sals. (S Char 4.) Rail salscompris abou on-half of all houshold xpndiurs. Rail sals xclud som of h mor basic pur-chass such as housing, haing, childcar and ohr ims ha ar no availabl in rail ouls.

rends by major groups o expenditures Medical care up the mosttabl 1 provids spnding growh simas for igh major groups of xpndiurs. T groups arrankd according o hir ras of growh in currn dollar ovr h 2000 o 2008 priod.

T rcssion yar numbrs indica ha xpndiurs ros in four of h igh major groups and fll inh ohr four. T biggs incras in h rcssion yar was for mdical car and halh srvics (+6%)

whil a drop in oil prics causd h ransporaion and communicaions group (-7%) o fall.

TABLE 1 Change in household expenditures by major group, 2000 to 2008 plus recession year

Ranking of major groups of expendituresby rate of increasefrom 2000 to 2008

2000 to 2008% change inexpenditures

RECESSION YEAR% change inexpenditures 3rd Q2008 to 3rd Q 2009

Total expenditures 50% 0%

1- Out of pocket medical and health services 75 6

2- Furniture, furnishings, equip, maintenance 49 -1

3- Shelter, fuel and power 49 2

4- Miscellaneous goods and services 47 1

5- Transportation and communications 46 -7

6- Recreation, entertainment, cultural services 43 -1

7- Food, beverages and tobacco 42 5

8 - Clothing and footwear 29 -3

Source: People Patterns Consulting based on Statistics Canada, Income and Expenditure Accounts

vr h 2000 o 2008 priod, h fass growh was h 75% jump in ou of pock xpndiurs onmdical car and halh srvics. As nod abov, growh coninud in h rcssion yar as xpndiursadvancd by anohr 6%. Tis major group is comprisd of ims ha canno b asily pospond, vnin a rcssion.

T nx six groups of xpndiurs all grw wihin a rlaivly narrow rang of 42% o 49% ovr h2000 o 2008 priod.

For wo of hs groups (furniur, c. and rcraion, c.), mos of h growh (boh +49%) camfrom advancs in volum rms wih vry lil coming from pric incrass.


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In sharp conras, h incrasd xpndiurs for h food, bvrags and obacco group (+42%) moslyrcd pric incrass.

T 29% advanc in xpndiurs on clohing and foowar group migh hav bn much highr ifprics had no droppd sharply. T pric dclins wr mainly du o h inux of lowr-pricd im-

pord goods.

Whil no par of his daa bas, i is noworhy ha oal incom axs paid by h houshold scoradvancd by 33% from 2000 o 2008. Tis is signicanly lss han h growh of oal xpndiurs

which incrasd by 50%. In h rcssion yar, incom ax paymns droppd by 6%. Tis, in par, con-ribud o growing govrnmn dcis in h rcssion yar.

Expenditure growth: Te Fastest 20 and Slowest 20

tabls 2 and 3 lis hFastest 20and Slowest 20growh ims among 130 goods and srvics purchasdby housholds ovr h 2000 o 2008 priod.

T las column indicas how hs ims fard in h rcssion yar.

I is noworhy ha only 6 ou of hFastest 20ims (30%) shrank during h rcssion yar whil 12of h Slowest 20ims (60%) ihr shrank or did no grow a all during h rcssion yar. Tis suggssha h ims in hFastest 20may b viwd as lss discrionary and/or simply mor dsirabl han arh ims in h slowr growing cagory.

Pet care expenses outpaced all other items in the decadeIf you ar among hos who gussd h op growh im, you ar probably a p ownr.

T fass growing im from 2000 o 2008 was p car, booming ahad by 123% and growing byanohr 9% in h rcssion yar. Rlad purchass of ps and p supplis rankd high in 13h spo.In 2008, xacly half of all Canadian housholds had p xpnss of on kind or anohr - roughly hsam as a dcad arlir.

Domsic srvics grw h scond fass (+96%) ovr h priod. Tis largly rcs h incrasingnumbr of dual-workr housholds. Ts xpndiurs also coninud o incras rapidly (+11%) dur-ing h rcssion yar.

T mov o usr pay nancing by govrnmns was h major push bhind h 93% jump in bridgand highway olls.

Hug incrass in lodging coss a univrsiis (+93%), combind wih rising univrsiy fs, including uiionand ohr fs (+79%), ar crainly placing addiional nancial prssurs on sudns and hir parns.


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24 |

TABLE 2 Fastest 20growing expenditures (including taxes paid), 2000 to 2008 plus recession year

Ranking out of 130 series by fastest increasesfrom 2000 to 2008

% change in expendituresfrom 2000 to 2008

RECESSION YEAR% change in expenditures3rd Q 2008 to 3rd Q 2009

Total expenditures 50% 0%1 - Pet care 123 9

2 - Domestic services 96 11

3 - Bridge and highway tolls 93 -15

4 - Lodging in universities 93 4

5 - Pharmaceutical products, medical goods 91 4

6 - Cable television and pay television 88 8

7 - Taxis 83 9

8 - Stoves, ranges and microwave ovens 79 -2

9 - University fees 79 7

10 - Water, Sewage and Garbage services 79 11

11 - Motor fuels and lubricants 78 -22

12 - Moving and storage 77 -4

13 - Pets and supplies 75 5

14 - Property insurance 72 3

15 - Hospital care and the like 72 8

16 - Special care facilities 71 7

17 - Medical care, dental care and the like 70 7

18 - TV sets, video equipment, accessories 69 -719 - Parking 66 8

20 - Furniture 66 -6

Source: People Patterns Consulting based on Statistics Canada, Income and Expenditure Accounts, purchased data.

Four of hFastest 20growing xpndiurs rla o ou of pock mdical xpndiurs (#5, #15, #16and #17). In tabl 1, his major grouping was h fass growing (+75%) among h major groups.harmacuical producs and mdical goods purchass soard by 91%. Hospial car, spcial car, mdi-cal car, and dnal car oulays all advancd by 70% o 72%.

Cabl and pay lvision xpnss rankd 6h (+88%) in rms of growh. Rlad xpndiurs on lvi-sion ss, vido quipmn and ohr accssoris rankd 18h (+69%).

Ims rankd 7h (axis a +83%), 11h (moor fuls and lubricans a +78%), 12h (moving and soraga +77%) and 19h (parking a +66%) all advancd much mor rapidly in currn dollars han in volumrms. Tr wr signican pric incrass for all of hs ims.


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T purchass of sovs, rangs and microwav ovns (8 h), and furniur (20h) all incrasd mor in vol-um rms han in currn dollars. In boh cass, prics dclind ovr h 2000 o 2008 priod.

ropry insuranc coss, rankd 14h in rms of growh, advancd by 72%, almos qually dividdbwn addiional purchass and pric incrass.

Child care in the home registers biggest decline in decadeSomon who is no up on boh dmographic and labour mark rnds migh no hav gussd h

waks im in our Slowest 20lis.

expndiurs on child car in h hom dippd by 15% from 2000 o 2008 and hus rankd as hbiggs drop during h dcad. Child car ousid h hom grw by 25% bu sill rankd 16 h in hSlowest 20in rms of xpndiur growh. Boh grw during h rcssion yar. In 2008, abou 11% of

housholds had child car xpnss, roughly h sam as in 2000.

ar of his slow growh in car xpnss rcs h a numbr of childrn undr h ag of v ovrh priod. Tr wr approximaly 1.8 million of hs young childrn in boh 2000 and 2008. Tdclin in child car in h hom combind wih growh ousid h hom is du o h growing raliyha mor and mor womn ar working ousid h hom. According o h las Canada Job rendsUpdate rpor21, 58% of lon-parns mohrs wih childrn undr six yars of ag wr in h labourforc, 70% of mohrs of young childrn wih an mployd spous wr in h labour forc, as wr 81%of lon-parn fahrs.

T scond biggs (-10%) dclin was in pari-muul bing on hors racs. Svral rac racks havclosd in rcn yars.

nly wo ohr ims (phoographic srvics and oc machins and compur quipmn) rgisrdabsolu dclins of 6% ovr h 2000 o 2008 priod. Som of his dclin was du o falling pricshroughou h dcad.

All of h ohr 16 ims in h Slowest 20rgisrd small or rlaivly small incrass during h priod.All of hs growh numbrs ar much smallr han h 50% gain for all 130 ims combind.


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26 |

TABLE 3 Slowest 20 growing or declining expenditures (including taxes paid), 2000 to 2008 plus recession year

Ranking out of 130 series by biggest declinesor slowest growth from 2000 to 2008

% change in expendituresfrom 2000 to 2008

RECESSION YEAR% change in expenditures3rd Q 2008 to 3rd Q 2009

Total expenditures 50% 0%1 - Child care in the home -15 3

2 - Pari-mutuel betting (horse racing) -10 -4

3 - Photographic services -6 3

4 - Ofce machines, computer equipment -6 -8

5 - Furniture and appliance rentals 2 0

6 - Musical instruments and supplies 2 -1

7 - Laundry and dry cleaning 6 1

8 - Life insurance 11 2

9 - New automobiles 12 -1910 - Mens clothing repairs and alterations 16 0

11 - Thread, yarn and sewing accessories 18 -3

12 - New trucks and vans 20 -9

13 - Mens and boys clothing 23 -2

14 - Commissions paid to tour operators 24 -4

15 - Newspapers, books, mags, stationery 24 1

16 - Child care outside the home 25 4

17 - Alcoholic drinks in licensed premises 25 0

18 - Air transport 26 -5

19 - Paid lodging (excluding universities) 27 5

20 - Undertaking and other funeral services 27 3

Source: People Patterns Consulting based on Statistics Canada, Income and Expenditure Accounts, purchased data.

Ims rankd 5h slows (furniur and applianc rnals) and 6h slows (musical insrumns and sup-plis) boh grw by only 2% in currn dollars. Ts ims also xprincd signican pric dclins.

T im rankd 9h on h slow sid was nw auomobils sals which incrasd by only 12% from 2000o 2008. Tis gain was all wipd ou, and mor, in h rcssion yar as auomobil purchass droppdby 20% in ha on yar alon.

expndiurs on mns and boys clohing sals (+16%) and rpairs and alraions (+23%) wr modr-a during h dcad. rics of mns clohing also dclind during h dcad.

Ims rankd 14h o 20h all grw only half as fas as h avrag for all ims.


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Alcoholic bvrags purchasd in licnsd prmiss (rankd 17h )incrasd by 25% during h 2000 o2008 priod, whil alcoholic bvrags purchasd in sors (no lisd) incrasd by abou 50%.

Final thought

tracking how familis and individuals ar doing nancially is always a challnging ask. T rnds arinuncd by currn conomic condiions, by h changing labour mark, by h inroducion ordmis of producs and srvics, by changing ass, by h changing disribuion of incoms and walh,and by changing dmographics.

I is our hop ha h annual rpors producd (11 so far) hav providd a br undrsanding of hmany divrs forcs inuncing Canadian family nancs.

See you again next year


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APPENDIX A - Average incomes of families and unattached individuals, low-income gap and share ofincomes after transfers and income taxes

constant 2007$

% change over selected periods

Entire periodSo far this

decadeLatest yearavailable

1990 2000 2007 2007/1990 2007/2000 2007/ 2006

All households $48,000 $50,700 $57,400 19.6% 13.2% 3.6%

All families of 2 persons or more 58,100 63,000 71,900 23.8 14.1 4.1

Senior families of 2 persons or more (65 and over)

Senior married couples 42,900 44,000 52,700 22.8 19.8 6.9

Other senior families 56,600 50,300 59,300 4.8 17.9 2.4

Non-senior families of 2 persons or more (under 65)

Married couples without children 55,100 59,900 70,000 27.0 16.9 4.2

One earner 46,900 48,500 56,400 20.3 16.3 5.0

two earners 61,300 67,800 77,500 26.4 14.3 2.9

Married couples with children 63,600 71,100 82,000 28.9 15.3 5.1

One earner 46,500 51,900 58,700 26.2 13.1 4.6

two earners 63,100 72,200 81,400 29.0 12.7 5.0 Female lone-parent 28,200 32,800 39,500 40.1 20.4 4.5

Male lone-parent 43,500 47,000 52,100 19.8 10.9 -6.5

All families of 2 persons or more by province

Newfoundland 47,600 49,400 59,500 25.0 20.4 9.4

Prince Edward Island 49,400 51,600 58,300 18.0 13.0 1.7

Nova Scotia 51,600 54,100 60,900 18.0 12.6 1.2

New Brunswick 49,100 53,000 57,800 17.7 9.1 3.6

Quebec 51,700 55,200 61,800 19.5 12.0 2.3

Ontario 64,800 71,700 76,600 18.2 6.8 3.5

Manitoba 53,600 55,900 67,100 25.2 20.0 5.8

Saskatchewan 50,600 54,100 67,700 33.8 25.1 4.8 Alberta 59,600 67,200 86,600 45.3 28.9 5.4

British Columbia 59,200 59,500 73,700 24.5 23.9 6.0

Unattached individuals (living alone or with someone who is not related)

Total 25,500 25,600 29,800 16.9 16.4 2.4

Senior males (65 and over) 24,400 25,100 31,000 27.0 23.5 8.8

Senior females (65 and over) 21,400 22,500 25,800 20.6 14.7 -1.1

Non-senior males (under 65) 28,900 28,800 32,700 13.1 13.5 0.9

Non-senior females (under 65) 24,200 23,400 27,800 14.9 18.8 4.5

Average income gap - $ needed to escape poverty (low-income cutoff)

All families of 2 persons or more 7,900 7,900 7,200 -8.9 -8.9 1.4

Unattached individuals 5,600 6,600 6,500 16.1 -1.5 -1.5 % share of after transfer and income tax incomes - all families of 2 persons or more by income groups

(change is in percentage points (pp)

Poorest fth of families 7.5% 6.9% 7.3% -0.2 pp 0.4 pp 0.0 pp

Lower-middle fth of families 13.4% 12.6% 12.6% -0.8 pp 0.0 pp 0.0 pp

Middle fth of families 18.2% 17.4% 17.3% -0.9 pp -0.1 pp -0.0 pp

Upper-middle fth of families 23.8% 23.3% 23.1% -0.7 pp -0.2 pp -0.1 pp

Richest fth of families 37.1% 39.8% 39.7% +2.6 pp -0.1 pp 0.1 pp

Source: People Patterns Consulting based on Statistics Canada, Income in Canada, 2007


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APPENDIX B - Families and unattached individuals with low-incomes (poverty) after transfers andincome taxes

% with low-incomes (poverty)

change in percentage points during

Entire period So far thisdecadeLatest yearavailable

1990 2000 2007 2007/1990 2007/2000 2007/2006

All households 15.9% 16.8% 13.3% -2.6pp -3.5 pp -1.3 pp All families of 2 persons or more 9.1 9.0 5.8 -3.3 -3.2 -1.2

Senior families (65 and over)

Senior married couples 2.7 1.2 0.9 -1.8 -0.3 -0.3

Other senior families 3.2 10.1 3.6 +0.4 -6.5 -2.5

Non-senior families (under 65)

Married couples without children 6.7 6.9 4.7 -2.0 -2.2 -1.0

One earner 9.5 10.2 6.3 -3.2 -3.9 -0.9

two earners 2.7 2.2 2.3 -0.4 +0.1 -0.5

Married couples with children 7.2 8.3 5.1 -2.1 -3.2 -1.5

One earner 16.6 22.3 18.9 +2.3 -3.4 -0.8

two earners 4.4 4.1 2.3 -2.1 -1.8 -1.3

Female lone-parent 47.8 36.3 23.6 -24.2 -12.7 -4.6

Male lone-parent 18.4 12.3 10.8 -7.6 -1.5 +3.6

All households by age of major income earner

Under 25 47.3 48.2 41.9 -5.4 -6.3 -3.5

25-34 15.9 17.8 14.4 -1.5 -3.4 0.0

35-44 12.2 13.1 11.3 -0.9 -1.8 -1.9

45-54 10.1 13.4 11.0 +0.9 -2.4 -0.6

55-64 15.6 21.1 14.3 -1.3 -6.8 -2.4

65 and over 14.8 11.5 7.3 -7.5 -4.2 -1.0

Children 0-17 by province

Canada 14.0 13.9 9.5 -4.5 -4.4 -1.9

Newfoundland 18.1 17.9 6.5 -11.6 -11.4 -2.8

Prince Edward Island 6.7 7.7 4.7 -2.0 -3.0 +0.7

Nova Scotia 11.7 12.6 8.4 -3.3 -4.2 -0.4

New Brunswick 13.7 10.8 9.4 -4.3 -1.4 -2.1

Quebec 14.6 16.1 9.5 -5.1 -6.6 -0.4

Ontario 12.0 13.0 9.4 -2.6 -3.6 -2.5

Manitoba 19.4 16.9 11.1 -8.3 -5.8 -1.6

Saskatchewan 17.2 13.2 8.9 -8.3 -4.3 -5.7

Alberta 15.3 12.5 6.3 -9.0 -6.2 -0.7

British Columbia 14.9 14.2 13.0 -1.9 -1.2 -3.5

Unattached individuals

Total 31.3 32.9 27.4 -3.9 -5.5 -1.8 Senior males (65 and over) 20.7 17.6 13.0 -7.7 -4.5 -1.0

Senior females (65 and over) 30.5 21.7 14.3 -16.2 -7.4 -1.8

Non-senior males (under 65) 29.4 32.1 29.7 +0.3 -2.4 -1.5

Non-senior females (under 65) 36.8 44.3 35.1 -1.7 -0.2 -2.0

Note: A 4-person family living in a city of 500,000 or more with less than $33,946 ($8,486 per person)and a 4-person rural family with less than $22,206 ($5,551 per person) annually are classied as being low-income.Source: People Patterns Consulting based on Statistics Canada, Income in Canada, 2007


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APPENDIX C - Major components of average net worth per household based on market value in constant 2007$

Value in 2007$

% change over selected periods

Entire period So far thisdecadeLatest yearavailable*

1990 2000 2009(3Q)

2009(3Q) /

1990

2009(3Q) /

2000

2009(3Q) /

2008Total assets $299,800 $415,440 $485,930 62.1% 17.0% -1.5%

Financial assets 159,860 261,120 269,600 68.6 3.2 -1.7

of which shares 28,120 92,730 93,690 233.2 1.0 -5.1

of which life ins./pensions 51,590 92,420 96,450 87.0 4.4 -2.5

of which all other ** 80,160 75,970 79,460 -0.9 4.6 3.9

Real (non-nancial) assets 139,940 154,320 216,330 54.6 40.2 -1.4

of which real estate 110,260 124,590 186,890 69.5 50.0 -1.4

of which consumer durables 26,660 26,700 27,400 2.8 2.6 -1.1

of which all other *** 3,020 3,026 2,040 -32.6 -32.7 -2.7

MINUS Total debt 54,150 66,260 96,080 77.4 45.0 5.7

of which consumer credit 12,460 15,580 27,250 118.7 74.9 7.5 of which mortgages 34,410 41,170 59,920 74.1 45.5 6.0

of which other debt**** 7,280 9,510 8,910 22.5 -6.3 -1.1

EQUALS Net worth 245,660 349,180 389,840 58.7 11.6 -3.2

Selected ratios

Total debt as % of disposable income 91% 111% 145% +54 pp +34 pp +8 pp

Consumer and mortgage debt as% of disposable income

79% 95% 132% +53 pp +37 pp +8 pp

Consumer credit as % consumer durables 47% 58% 100% +53 pp +42 pp + 8 pp

Total debt as % of total assets 18% 16% 20% +2 pp +4 pp +1 pp

Total debt as % of net worth 22% 19% 25% +3 pp +6 pp +2 pp

Real estate as % of net worth 45% 36% 48% +3pp +12 pp +1 pp * The changes for the latest period (3Q-2009) are from the annual average for 2008.** Bonds, cash, loans to others, etc.*** Machinery and equipment of unincorporated small business owners, etc.**** Mortgages on non-residential buildings, small business lines of credit, etc.Source: People Patterns Consulting based on Statistics Canada


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EndnotEs and sourcEs

Ky Saisics Canada daa sourcs usd in h rpor. Employment Earnings and Hours Report Labour Force Survey

Consumer Price Index Income rends in Canada Survey of Household Spending Survey of Financial Security National Income and Expenditure Accounts and National Balance Sheet Accounts Various electronic sources and CANSIM tables

2 Bank of Canada,Financial System Review, Dcmbr 2008. hp://www.bankofcanada.ca/n/fsr/2008/fsr_1208.pdf

3

Bank of Canada,Financial System Review, Dcmbr 2009. hp://www.bankofcanada.ca/n/fsr/2009/fsr_1209.pdf

4 Manulif Financial as rpord in Te Globe and Mail. Roma Luciw, tackling Db a Growingrioriy, Glob and Mail, January 5, 2010. hp://www.hglobandmail.com/glob-invsor/

prsonal-nanc/ackling-db-a-growing-prioriy/aricl1419724/

5 ollara for T economic Club of Canada rlasd on January 6, 2010. hp://www.pollara.ca/eCt2010/

6

ollara for T economic Club of Canada rlasd on January 6, 2010. hp://www.pollara.ca/eCt2010/

7 Nanos Rsarch as rpord in Te oronto Star. Canadians mos bullish on conomy sinc 2007,Te oronto Star, Dc. 31, 2009. hp://www.hsar.com/businss/aricl/744382--canadians-mos-bullish-on-conomy-sinc-2007

8 Ipsos Rid as rpord on Canada.com. Andrw Mayda, Rcssion sung Canadians, bu 2010looking brighr: oll, Canada.com, Dc. 29, 2009. hp://www.canada.com/businss/Rcssion+sung+Canadians+2010+looking+brighr+oll/2387291/sory.hml

9 Canadian ayroll Associaion, hp://www.nwswir.ca/n/rlass/archiv/Spmbr2009/14/c4808.hml

10 Bank of Canada,Financial System Review, Dcmbr 2009. hp://www.bankofcanada.ca/n/fsr/2009/fsr_1209.pdf


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11 Richard Archambaul and Dominic Lavrdir,A Macroeconomic Model for Analysing and ForecastingLevels of Business and Consumer Insolency in Canada, economic Informaion and Analysis, c ofh Suprinndn of Bankrupcy, Indusry Canada hp://sragis.ic.gc.ca/pic/inrn/inbsf-osb.nsf/n/br01499.hml. Ty conclud ha T drminan having h gras c on h incrasin h numbr of consumr insolvncis during h 1987-2003 priod is h oal db-o-incom raio.

According o our calculaions, his variabl accound for 88% of h incras in consumr insolvncyduring his priod.

12 Ts ar homs ha sold via MLS (Mulipl Lising Srvic). MLS is a radmark of h CanadianRal esa Associaion.

13 Royal Lpag Ral esa Srvics. hp://www.nwswir.ca/n/rlass/archiv/Dcmbr2009/15/c3182.hml

14 Canada Morgag and Housing Corporaion,Mortgage Aordability Calculator How Much Can

You Aord? hp://www.cmhc-schl.gc.ca/n/co/buho/buho_007.cfm

15 David Rosnbrg, Floaing high on a dlica housing bubbl, Te Globe and Mail, Dc. 11, 2009.hp://www.hglobandmail.com/glob-invsor/invsmn-idas/faurs/xprs-podium/oaing-high-on-a-dlica-housing-bubbl/aricl1396658/

16 Garh turnr a hp://www.grarfool.ca/

17Jan-Francois Arsnaul and Andrw Sharp, Te Economic Crisis through the Lens of EconomicWellbeing, Jun 2009 for h Insiu of WllBing. hp://www.ciw.ca/Libraris/Documns/

Teconomic_Crisis_FullRpor.sb.ashx18 nario Associaion of Food Banks,In the Midst of the Storm: Te Impact of the Economic Downturnfor Ontarios Food Banks in 2009, cobr 2009. hp://www.oafb.ca/asss/pdfs/SpcialRpor.pdf

19 baind from Saisics Canada on Novmbr 30, 2009

20 Saisics Canada, Guide to the Income and Expenditure Accounts, Caalogu no. 13-017.

21 Rogr Sauv, Canada Job rends Update 2009, March 2009. hp://www.poplparnsconsuling.com/

2009: the current state of canadian family finances

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