Unfortunately, Statistics Canada had more bad news for us this morning–a weak November jobs report and a big decline in trade for October–both of which portend a marked slowdown in growth in the final quarter of this year. At the same time, the U.S. released a strong enough November employment report to assure that the Federal Reserve will raise overnight interest rates a quarter point on December 16, as is widely expected. This can’t help but weaken the Canadian dollar further and boost domestic interest rates, at least a bit. Most particularly, mortgage rates will likely continue to gradually edge higher, despite the Bank of Canada remaining on the sidelines for months to come.
Canadian employment fell by 36,000 last month, in part because of the layoff of temporary public sector workers hired for the election. Public sector jobs were down 33,000, offsetting the 32,000 increase in October. But there were job losses in the private sector as well, especially in wholesale trade, information, culture and recreation, and finance and insurance. Manufacturing jobs showed their first notable gain since May and construction employment picked up. Year-over-year, employment growth have been a modest 0.7% and the unemployment rate edged up to 7.1%, compared to 6.7% one year ago.
Job growth is likely to remain modest in 2016, depressed by further layoffs in the oil and mining sectors, as well as in finance and insurance as Canadian banks have announced continued Canadian layoffs in the coming year.
All of this calls for enhanced fiscal stimulus–big increases in government spending and tax cuts for the middle class. There should be no increases in taxes for high-income Canadians and the government should not entertain any further restrictions on mortgage lending or housing activity. Though these have been raised in recent trial balloons, they are unwarranted, unnecessary and potentially very harmful to an already shaky economy.
By Dr. Sherry Cooper:
Dr. Sherry Cooper took the position of Chief Economist, for Dominion Lending Centres in early 2015. Prior to joining DLC, Dr. Cooper was the Chief Economist with one of Canada’s largest financial institutions and is well versed in the mortgage sector. Dr. Cooper has an M.A. and Ph.D. in Economics from the University of Pittsburgh. She began her career at the United States Federal Reserve Board in Washington, D.C. where she worked very closely with then-Chairman, Paul Volcker, a relationship she maintains today. After five years at the Federal Reserve, she joined the Federal National Mortgage Association as Director of Financial Economics.
For more information about Dominion Lending Centres visit www.dominionlending.ca