19 Dec

BC Introduces Innovative New Program to Help First-Time Homebuyers

General

Posted by: Eileen Crosbie

BC Introduces Innovative New Program to Help First-Time Homebuyers

Premier Christy ClarkIn a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers. The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.1Íž

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020.

Eligible homebuyers

All individuals with a registered interest on title must reside in the home and:

  • Be a first-time homebuyer
  • Have been a Canadian citizen or permanent resident for at least five years
  • Have resided in BC for at least 12 months
  • Have a combined gross income of $150,000 or less
  • Have saved at least half of the minimum down payment they will require
  • Must be pre-approved for the first mortgage before applying

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

Eligible Properties

Any legal, self-contained, mortgageable residence located in BC

  • Must be used as a principal residence for the first 5 years
  • Rental properties and seasonal or recreational properties are not eligible
  • The purchase price cannot exceed $750,000

Home Partnership Loans

  • Up to 25-year term, registered as a second mortgage
  • No interest or principal payments for the first 5 years
  • Monthly principal and interest payments begin in year 6, amortized over remaining 20 years
  • Interest rate for years 6 to 10 set near first mortgage rate at time mortgage is registered
  • Interest rate reset to near first mortgage rate at years 10, 15, and 20
  • Homeowner may repay in full or part at any time without penalty.

The loan is due and payable in full upon

  • The home ceasing to be the primary resident in the first 5 years
  • Default on the first mortgage
  • Sale of home or change of ownership
  • Any other default on the Home Partnership second mortgage

Bottom Line: This is a bold and innovative step to help potential new buyers to meet the greatest hurdle of first-time homeownership—the down payment. The Federal Government’s new mortgage regulations released in October hit first-time homebuyers hard, so this program will be welcome relief for B.C. residents. The B.C. government estimates that it will make more than 42,000 new loans over the three-year life of this program, amounting to $703 million in new funding available for qualified first-time homebuyers to come up with their down payments. This is particularly important for BC, which has the highest home prices in Canada.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

19 Dec

Fed Hikes Rates For First Time This Year

General

Posted by: Eileen Crosbie

No Surprises Here: Fed Hikes By 25 Basis Points

No Surprises Here: Fed Hikes By 25 Basis Points
 
Rarely has there been a more widely expected result as today’s 0.25 percent rate hike by the Fed. This is the second interest rate increase since the Fed started the current process of interest rate re-normalization one year ago. Although, many had called for additional hikes earlier this year, the policy makers held the overnight rate steady until now.In today’s press release, the Federal Open Market Committee (FOMC) said it currently sees the US economy strengthening and the labour market tightening. The unemployment rate has fallen more than earlier forecasted and household spending has been rising moderately. Inflation has increased since earlier this year, but remains below the Committee’s 2 percent longer-run target, partly reflecting earlier declines in energy prices and in the prices of non-energy imports as the US dollar has strengthened. Inflation in wages, salaries and benefits have risen considerably, but still remains low. Inflation expectations remain well anchored at low levels. 

One area of economic weakness highlighted by the Fed is business fixed investment. The same disappointing behaviour is evident in Canada as well as businesses have refrained from adding meaningfully to plant, machinery, equipment or software. This troubling weakness has weighed heavily on productivity.

The FOMC intends to increase the target overnight federal funds rate only gradually, which it now considers to be consistent with GDP growth of 2.1 percent next year, up from the earlier median forecast of 2.0 percent. The median forecast for 2018 remains at 2.0 percent and is up slightly to 1.9 percent in 2019. The Fed’s median estimate of longer-term potential growth remains steady at 1.8 percent, roughly in line with the Bank of Canada’s forecast for Canadian potential growth. The range of Committee forecasts is 1.6 to 2.2 percent in the US. 

The Fed sees the near-term risks to the forecast as balanced. The target range for the federal funds rate is now 1/2 to 3/4 percent, which is deemed to remain accommodative, thereby supporting some further strengthening in labour market conditions and a return to 2 percent inflation.

Committee members believe that only a gradual rise in interest rates is warranted given the low level of inflation. Moreover, they expect the federal funds rate will remain below the longer-run expected rate for some time. According to the newly released forecasts of individual members, most expect to the Fed to hike rates three times next year, although the range of estimates is relatively wide. Actual rate hikes, as always, will be dependent on economic data, market movements and global developments. Most members estimate that the longer-term federal funds rate is likely to be 2-3/4 to 3.0 percent.

The markets are watching for the reaction of the President-elect to today’s Fed release. President-elect Trump accused the Fed during the election campaign of being politically motivated in keeping rates steady this year. There is some concern that the Trump administration might threaten the independence of the Fed, in direct contrast to recent presidential policy. Many are expecting PEOTUS to tweet his opinion of today’s move. 

The Bank of Canada will not follow the Fed’s move. Canada’s economy is weaker than that of the US and inflation remains low. Although oil prices have increased recently owing to OPEC and non-OPEC announcements of production cuts, the future path of oil prices remains uncertain.

Longer-term interest rates around the world have spiked since the Trump election as stock markets have rallied. This has driven up mortgage rates in Canada. It is widely expected that the Trump administration will cut tax rates and increased government spending, thereby conducting a very stimulative fiscal policy. This is the reason for the rise in longer-term interest rates. The validity of this view remains to be seen, but such action would likely have most of its impact on growth in 2018 and beyond. 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

6 Dec

The Latest with Bullying Ends Here

General

Posted by: Eileen Crosbie

The Latest with Bullying Ends Here

Dave Teixeira with Tad Milmine

Home Sweet Home! Since our last update, so much has happened with the charity. I am so happy to announce that Bullying Ends Here has a new updated homepage on the website www.bullyingendshere.ca. I know you will like it as I wanted to have things a bit easier to use and see. Take a look when you can.

We had our first Board of Directors retreat in Vancouver for the charity. This was the first time that our Board has been together in one room. Not only did we have the chance to meet in person, but we had a VERY successful gathering. I don’t want to give away too much right now, but let’s just say, that I will have much to share with you in the coming months!

At the retreat, we had the pleasure of having Dave Teixeira, VP of Marketing, Public Relations and Communication with Dominion Lending Centres attend. He too got to meet the team, BUT, we also got to reward him with our Bullying Ends Here Award. This award consists of a coin and inscribed plaque designed with the help of Jamie’s family. Long before Dave was with DLC, he and I had crossed paths in our crusade to end bullying. As the world would have it, we are still working together to help save lives. Dave has worked hard to ensure that Bullying Ends Here can continue to reach as many as we do.

I took a couple of weeks of vacation time to do my annual East Coast Tour (and beyond). I traveled to AB, BC, SK, NS, NB, PEI and ON for presentations and interviews. To be able to share my journey with so many, across the Country, is such an honour. In this past month alone, I have presented to over 10,000 youth in 7 Provinces and have received hundreds of emails. What a success! I just hope that the message resonates and continues to help long after I have left.

November 13th marked the 4 year mark of Constable Adrian Oliver’s passing. I was fortunate enough to travel to Burnaby, BC to participate in his annual run to raise funds for the Honour House. It was moving to see so many former colleagues, friends and family of Adrian’s all come together for the event.

I just released the second edition to my book ‘Bullying Ends Here – My Life’. This took months to do as I wanted to make some important edits, updates and also add some chapters to act as a resource. I have included some notes on what the youth are saying in the tens of thousands of emails I have received, I included some tips and our very own LAAA concept. The LAAA stands for Listen, Ask, Agree, Act. These are the steps that I have learned are most important on handling a young victim of bullying. I go into detail on these steps in the book. The book is available on Amazon.com or also on www.bullyingendshere.ca. All proceeds continue to go directly to the charity.

I have added some more presentation dates for all across Canada for 2017. The schedule is available on the new homepage that I was speaking about above. These will go fast as we have already received requests a year in advance.

The program has brought a new consultant on board, Keigan, who is now helping reduce the workload by taking over much of the scheduling, social media and travel arrangements. Keigan is an incredible young many with loads of energy and ideas. His addition to Bullying Ends Here will ensure that even more time is available to help those that need it most.

Finally, Jamie Hubley’s birthday was November 23rd. He would have been 21 years old. Not a day goes by that I don’t think about him and how much he means to me. A young person that I never had the honour of meeting. It is because of Jamie that I started this journey, created the program and wrote this blog. My life is dedicated to his memory and I intend on keeping that memory alive. Although it took a tragedy to bring us all together, that very same tragedy is preventing others. Lets continue to spread Jamie’s positive message of acceptance and understanding.

This message, paired with our efforts, will not only change lives, but SAVE them!

 
Tad Milmine

Tad Milmine

Founder, Bullying Ends Here

6 Dec

November Jobs Report Canada and US

General

Posted by: Eileen Crosbie

Canadian Jobless Rate Falls as Labour Force Shrinks

Canadian Jobless Rate Falls as Labour Force Shrinks
 
Following four consecutive months of job gains, Canadian employment increased by 11,000 (or 0.1%) in November. Economists had expected hiring to decline by 15,000 according to the Bloomberg News survey. All of the rise in employment, however, was in part-time jobs, as full-time hiring fell by 8,700. This pattern is particularly worrisome as over the past 12 months, all of the net rise in employment has been in part-time work. Nationwide, part-time work has grown by 6.4% and full-time has fallen by 0.2% year-over-year.

The jobless rate fell unexpectedly by 0.2 percentage points to 6.8% as fewer people were looking for work. This is the first time the unemployment rate has fallen in five months

The fourth straight monthly jobs gain is another boost to an economy healing from a collapse in commodity prices and business investment. Output growth rebounded to a 3.5% pace in the third quarter, and Governor Stephen Poloz said Monday he would only cut his 0.5% benchmark interest rate if there was another shock. His next rate decision is Wednesday.

The November jobs report highlighted the continued weakness in the oil sector. Unemployment in Alberta surged to its highest level in more than two decades to 9.0%, and in the manufacturing region of Quebec, it fell to a record low 6.2%; however, most of the rise in discouraged workers was in Quebec where the labour force dropped by 20,300, the largest drop since December 2014.

Service companies hired 31,200 workers, with almost half of those in the financial services and real estate sector. Goods producers cut back by 20,600, as manufacturing jobs dropped by 11,900 and construction fell 14,400.

The number of hours worked rose 1.1% in November from a year earlier. Average hourly wages of permanent employees grew 1.5% from a year earlier, slower than the 1.8% pace in October.

Clearly, the Bank of Canada will remain on the sidelines next week. Despite stable monetary policy in Canada, however, mortgage rates are rising reflective of the rise in market yields since President-elect Trump won the US election. Some mortgage rates in Canada are priced off of the 5-year government of Canada bond yield, which has risen more than 30 basis points since the election.

Provincial Unemployment Rates in November In Descending Order (per cent)
(Previous months in brackets)
 

   –– Newfoundland and Labrador     14.3 (14.9)
   — Prince Edward Island                  10.8 (11.7)
   — Alberta                                           9.0 (8.5)
   — New Brunswick                             8.7 (10.0)   
   — Nova Scotia                                   8.0 (7.6)
   — Saskatchewan                               6.8 (6.9)   
   — Ontario                                           6.3 (6.4)
   — Quebec                                           6.2 (6.8)
   — Manitoba                                        6.2 (6.4)  
   — British Columbia                           6.1 (6.2)

US Payrolls Rise As Jobless Rate Falls to Nine-Year Low 

The November jobs report in the US provided a mixed picture as wages and participation rates–two closely watched indicators–showed disturbing declines. The headline payrolls gain was close to expectation, posting 178,000 net new jobs–just shy of the average monthly gain this year. Year-to-date, employers have added an average of 181,000 jobs per month. But the performance has been inconsistent–with a low of 24,000 in May and a peak of 271,000 in June. November’s gain of 178,000 signals steady hiring and more progress toward the Fed’s goal of full employment.

The unemployment rate fell to a nine-year low of 4.6% from 4.9% in the previous month on a drop in the number of people in the workforce. One of the most troubling developments in recent years is a drop in the labour-force participation rate. Its decline is partly because baby boomers are retiring. But the rate for prime-age workers, 25 to 54, has also fallen, matching a 30-year low late in 2015. 

Another piece of good news, however, is that the broader measure of unemployment, which includes people stuck in part-time work and people who have stopped looking, fell from 9.5% in October to 9.3% in November.

Even with tight labour markets, the news on wages was disappointing. Average hourly earnings fell by 0.1% from the prior month, the first decline since December 2014. They rose 2.5% over the past twelve months, following a 2.8% gain in October. 

Other indicators show spotty weakness in the jobs market. Factory payrolls fell once again and retailers reduced payrolls going into the holiday season.

Despite this mixed picture, the headline jobs gain and the fall in the jobless rate assure that the Fed will raise rates when they meet again in December 14.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

6 Dec

Canadian Economy Bounces Back in Q3

General

Posted by: Eileen Crosbie

Canadian Economy Rebounds in Q3

 Canadian Economy Rebounds in Q3
 
According to data released this morning by Statistics Canada, the Canadian economy bounced back strongly in the third quarter from the Alberta-wildfire contraction in Q2. The economy grew at a 3.5% (quarter-over-quarter) annual rate in Q3, in line with expectation, following the 1.3% slide in the prior period. The rebound was driven by a sharp revival in net exports, stronger household consumption expenditures and an uptick in inventories. On the other hand, business capital formation continued weak. 

Exports of energy products surged following the decline in Q2 brought on by the wildfires and scheduled maintenance shutdowns. The one exception was natural gas exports, which declined. Weakness in export growth has plagued the Canadian economy for more than two years in the wake of the oil price decline in mid-2014. Despite the fall in the Canadian dollar, net exports of non-energy products has not been a sufficient offsetting factor. Underlying trends in Canadian net exports remain disappointing.

Consumer spending contributed to the rebound, largely in nondurable goods and services. Durable goods expenditures fell, reflecting a decline in vehicle purchases. Spending by consumers was boosted by the July 1 introduction of the new Canada Child Benefit program, which boosted household disposable income. 

Business investment in residential structures contracted following nine consecutive quarters of growth. Ownership transfer costs, which reflect activity in the resale market, contributed most of the decline in investment in housing. Resale activity in the Vancouver region has slowed significantly, exacerbated by the August introduction of a new tax on home purchases by foreign non-residents in BC. Construction of new homes dipped slightly last quarter while renovations edged up a bit.

Business investment in machinery, equipment and intellectual property remained a important laggard. The Bank of Canada has been hoping for a rebound in business capital spending because it boosts productivity and is an important indication of rising business confidence. Particularly troubling is the decline in spending for research and development and software. Overall business capital formation has decreased for eight consecutive quarters.

In a separate release, Stats Canada reported that monthly GDP increased by a better-than-expected 0.3% in September, reflecting mainly higher output in the resource sector. This starts the final quarter of the year on a relatively strong footing. 

While the third quarter’s growth was the strongest in two years, it merely reflects a rebound from the devastating contraction in Q2 and does not represent a sustainable pace of expansion. Growth in the current quarter is more likely to be roughly 2% and to come in at just under that pace in 2017. The Bank of Canada estimates that potential growth for the Canadian economy is around 1.8%, down substantially from the 3% potential growth rate posted when labour force growth was at peak levels in the 80s and 90s. Similarly in other developed economies, potential growth has slowed as the population is aging. This is why increases in productivity growth and the immigration of skilled labour is particularly important now.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

6 Dec

October Home Sales Up Everywhere Except In BC’s Lower Mainland

General

Posted by: Eileen Crosbie

October Homes Sales Edged Up in Canada, But Declined Again in Vancouver

October Home Sales Up Everywhere Except In BC's Lower Mainland
 
This morning, the Canadian Real Estate Association (CREA) released its national real estate statistics for October, which showed a modest uptick in home sales nationally, as new listings ticked up and home prices increased once again. For Canada as a whole, the number of homes trading on the MLS Systems increased 2.0% month-over-month in October–up a bit more than in September–following a four-month downtrend. 

Continuing recent performance trends, sales increased again in the Greater Toronto Area (GTA) and environs offset by y-o-y declines in BC’s Lower Mainland. This marked the seventh consecutive monthly decline in sales in BC’s Lower Mainland. The sales decline in BC began even before the August introduction of the new foreign buyers’ tax in Metro Vancouver.

Finance Minister Morneau announced measures to tighten qualifications for fixed rate mortgage loans and to restrict the insurability of these loans in early October. In addition, foreign exemption from capital gains taxes on Canadian real estate were limited to primary residences. It is still too soon to tell how large an effect these initiatives will have in slowing sales and price appreciation.

Another bit of uncertainty has been injected into the Canadian housing market by the surprising results of the US election. The Trump administration is expected to prime the pump with substantial tax cuts and infrastructure spending. As a result, US bond markets have sold off sharply since his election, driving interest rates up sharply. As well, the US Federal Reserve is widely expected to hike the target overnight rate next month. The upward pressure on US interest rates has had ripple effects around the world. 

The Canadian five-year government bond yield has risen sharply— from as low as 0.71% one week before the election to 0.96% yesterday. Mortgage rates, priced off of the benchmark five-year yield, are rising commensurately, although as of today, the posted rate remains at 4.64%.  As well, the Canadian dollar has fallen sharply as the Bank of Canada is expected to buck the tide of Fed actions and remain on the sidelines for the foreseeable future.

New Listings Edge Upward

The number of newly listed homes climbed 1.7% in October compared to the prior month. Led by a marked increase in the GTA, new listings increased in about 60% of all local markets. Housing inventory has been in acutely short supply in the GTA. The rise in new listings last month supported a rise in sales in the GTA and nationally.

The national sales-to-new listings ratio at 62.9% in October, compared to 62.4% in September. A ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market. 

The sales-to-new-listings ratio was above 60% in half of all local housing markets again last month–the vast majority of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. Quite importantly, the ratio remained out of sellers’ market territory, down to the mid-50% range in Greater Vancouver, after having begun the year at a whopping 90%.

Number of Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity. 
There were 4.5 months of inventory on a national basis at the end of October 2016–its lowest level in almost 7 years. The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C.

The number of months of inventory is at a record low in in the Greater Golden Horseshoe of Ontario, ranging between one and two months in Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Brantford, the Niagara Region, Barrie and nearby cottage country. It has slipped to below one month in Mississauga, the Durham Region, Orangeville, Cambridge and Guelph. It stands at about one month in Toronto.

According to Jason Mercer, the Toronto Real Estate Board’s Director of Market Analysis, “Seller’s market conditions continued to prevail as buyers of all home types experienced intense competition in the marketplace. Until we experience sustained relief in the supply of listings, the potential for strong annual rates of price growth will persist, especially in the low-rise market segments.”

Prices Continue to Rise

The Aggregate Composite MLS House Price Index (HPI) rose 14.6% y-o-y last month, up from 14.4% in September. This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next. 

Greater Vancouver (+24.8%) and the Fraser Valley (+32.5%) posted the largest y-o-y gains, although single family home prices in both markets are off their peak, having fallen in September as well. This was the first significant decline in this region since late 2012–early evidence that the new foreign tax has had an impact. 

As reported by CREA, double-digit y-o-y percentage price gains were also registered in Greater Toronto (+19.7%), Victoria (+20.1%) and Vancouver Island (+15.8%). All of these gains were up from the prior month.

By contrast, prices were down -4.1% y-o-y in Calgary. Although home prices there have held steady since May, they have remained below year-ago levels since August 2015 and are down 5.1% from the peak reached in January 2015.

Home prices also edged lower by 1.3% y-o-y in Saskatoon. Home prices in Saskatoon have also held below year-ago levels since August 2015.

Meanwhile, home prices posted additional y-o-y gains in Regina (+4.5%), Ottawa (+3.0%), Greater Moncton (+2.8%), and Greater Montreal (+2.6%).

First-Time Homebuyers in Ontario Get Some Relief

In other news, the Ontario Government doubled the tax rebate for first time homebuyers yesterday in the Fall Budget Update. The rebate of land transfer tax will be increased effective January 1 from $2,000 to $4,000. With the average house in the GTA now priced at more than three-quarters of a million dollars, the rebate, even at $4,000, will have only a small impact on affordability. As well, the City of Toronto also offers a tax rebate for new homeowners. It is currently up to $3,725. We will be watching to see if the City follows the Province in hiking its rebate.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

6 Dec

Jobs Market Strengthens, Especially in US

General

Posted by: Eileen Crosbie

Canadian Jobs Blew Through Estimates, But Devil Is In the Details

Canadian Jobs Blew Through Estimates, But Devil Is In the Details
 
Canadian employment rose 44,000 (+0.2%) in October–much stronger than expected. But all of the gain was because of more part-time work, as full-time employment fell. The unemployment rate remained unchanged at 7.0% as more people joined the labour force. 

Compared to one year ago, the total number of hours worked was little changed and employment rose by 140,000 (+0.8%, mostly in part-time work (+124,000 or +3.6%). This will certainly keep the Bank of Canada from following the US Federal Reserve’s likely rate hike next month. Indeed, we cannot rule out the possibility of a BoC rate cut next year, although Governor Poloz would likely prefer to see fiscal stimulus do the heavy lifting, particularly given the concern about out-sized household debt levels. 

By industry sector, construction employment continued to enjoy gains, mostly in Ontario and Quebec–notably, not in BC. Manufacturing continued weak with payrolls down -0.4% last month and down -1.5% over the past year. Natural resource payrolls were up on the month, but still down a whopping -5.6% year-over-year, dragging down the overall goods producing sector of employment.

Job gains in the service sector were better, although still lacklustre. Leading the way in this sector last month were trade, educational services, and public and other services. 

Regionally, jobs were up in Ontario by 25,000 last month as the jobless rate fell two-tenths to 6.4%. In BC, employment rose by 15,000, but the unemployment rate increased 0.5 percentage points to 6.2% as more people entered the labour force. Nevertheless, BC still boasts the lowest jobless rate among the provinces. Year-over-year, job growth in BC was the strongest in the country at 2.4% (+56,000). Employment declined in Newfoundland and Labrador, taking the jobless rate up to 14.9%–the highest among the provinces (see table below).

Despite the strong headline number for employment growth, this report continues to reveal a Canadian economy that is underperforming. All of the gain was in part-time work, the manufacturing sector remains weak, and there is no indication of more than a modest pace of economic activity this year, in line with this week’s fiscal update.

Provincial Unemployment Rates in October In Descending Order (per cent)
(Previous months in brackets)

   — Newfoundland and Labrador    14.9 (13.6)
   — Prince Edward Island                 11.7 (10.8)
   — New Brunswick                            10.0 (9.3)
   — Alberta                                           8.5 (8.5)
   — Nova Scotia                                   7.6 (8.1)
   — Saskatchewan                               6.9 (6.8)
   — Quebec                                           6.8 (6.9)
   — Ontario                                           6.4 (6.6)
   — Manitoba                                        6.4 (6.4)  
   — British Columbia                           6.2 (5.7)

4 Days From Election and US Jobs Strengthen

Although the headline payrolls gain of 161,000 missed estimates slightly, the jobless rate fell back to 4.9%–the cycle low–and most notably, wage gains accelerated to 2.8% year-over-year, their strongest pace since the financial crisis. The prior two months’ jobs gain was revised upward by 44,000, another piece of good news. Most would argue that despite the continued long-term underemployment of some workers, the US economy is at or near full employment. The strengthening wage growth is an indication of this, and it will boost the Fed’s already-high probability of hiking rates in December.

There remains a challenge to fill highly skilled jobs. Workers have been in short supply for 13 consecutive months, according to the Institute for Supply Management survey of service-industry companies, which make up almost 90% of the US economy. 

On the disappointing side, however, was the fall in the labour force participation rate and the weakness in manufacturing employment. The number of part-time workers and the long-term unemployed remain higher than before the last recession. These disaffected workers are an important component of the Trump base of support. The US underemployment rate dropped to 9.5% in October from 9.7%, while the number of people working involuntarily less than full-time remained unchanged. An estimated 5.89 million American employees were among this group. 

Expect a Fed rate hike in December–the first one this year. The Fed last increased the overnight fed funds rate in December of 2015, and many had expected additional rate hikes this year. These were postponed repeatedly owing to weaker-than-expected GDP growth and low inflation. US inflation has edged up recently and the Fed signaled strongly earlier this week that a rate hike is likely when they meet next month.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres