Market Watch Q4 2023: Navigating the Waters of Canada’s Unemployment and Interest Rates

The recent fluctuations in Canada’s unemployment rate and the Bank of Canada’s stance on interest rates have presented a nuanced scenario for the mortgage industry. Let’s delve into the recent economic indicators and their possible impact on our sector

1. Rising Unemployment Rates:
   • Canada saw its unemployment rate ascend to 5.7% in October 2023, a slight rise from 5.5% in September 2023. This uptick underscores a cooling national economy, despite the addition of 18,000 jobs last month. The sectors of wholesale, retail trade, and manufacturing witnessed a decline in employment, whereas construction, and information and culture and recreation sectors added jobs.
2. Bank of Canada’s Rate Stance:
   • In a bid to curb surging inflation, the Bank of Canada has pursued an aggressive rate-hiking path since March 2022, increasing interest rates 10 times and spiking its benchmark rate by 475 basis points. However, in light of the slightly easing labour market, the Bank chose to leave rates unchanged in October.
3. Economic Ripple Effects:
   • This moderation in job growth signals that the economy is beginning to feel the strain of the central bank’s rate hikes, which is mirrored in the recent gross domestic product (GDP) data showing an economic regression in Q2 2023, with a further downturn anticipated for the third quarter.
4. Hourly Wages and Inflation:
   • Despite the economic headwinds, average hourly wages saw a 4.8% annual increase, albeit at a slower pace compared to the previous month, indicating a complex wage-inflation dynamic.
5. Mortgage Landscape:
   • These economic metrics directly inform the mortgage landscape. A stable interest rate for now may present a conducive environment for potential buyers, while the rising unemployment rate might entail a cautious approach in mortgage approvals.
6. Our Guided Approach:
   • As always, we are here to traverse these economic waves together. Through our comprehensive 3-step plan, we are dedicated to understanding, assessing, and executing tailored mortgage solutions that align with both current economic realities and our clients’ short and long-term goals.
7. Looking Ahead:
   • Monitoring these economic indicators closely, alongside the Bank of Canada’s monetary policy, will be crucial in adapting our strategies to ensure we continue to provide optimal mortgage solutions and advice.