It’s like walking home with a bad report card. I know I’m in trouble, it’s just a matter of time before I get home and my parents find out.
People, we have another Bank of Canada rate hike coming. It’s just a matter of when and by how much .
Now, for those of you in adjustable rate Mortgages, do not panic. Don’t. Just breathe. Continue reading this blog post. I’m creating more content on longer-term interest rate projections/thoughts where I think you’ll feel more comfort that rates will not spike uncontrollably (coming soon).
For now, there is upward pressure on emergency low interest rates …
Job Growth Is Jet Fuel To The Rate Hike Fire.
December 2017 job’s data came out last week with positive news:
- Total employment increase by 79K in December and 80K in November.
- Total employment increased by 423K in the last 12 month period. Best performance since 2003.
- 62% employment rate (employment to population ratio) is the highest level in the current business cycle.
- Employment participation rate (people employed or actively looking) has been flat for the past 12 months helping translate Canada’s unemployment rate falling at its fastest pace since 2000. It’s a 4 decade low 5.7% in December.
Cyclical Industries Are Cycling Up:
Job gains are gaining momentum in cyclical industries, primarily found in other parts of Canada:
- 86K manufacturing job created over 12 months which is the strongest year since the early 2000’s.
- Relative to a year ago, above trend job creation has happened in wholesale/retail trade (79K), construction (51K), transportation (53K) and finance/insurance (53K).
Our Neighbouring Provinces Are Humming Along:
For us Calgarians, it might not feel like it’s a good time for the Bank of Canada to raise rates. However, other parts of our Country are moving along:
- Quebec’s total employment rose (27K), unemployment dropped from 6.1% down to 4.9% (Oct – Dec 2017) with their employment rate at 61.6%.
- Ontario’s December job creation is up (2K) and the unemployment rate remained at an 18 year low (5.5%).
- BC’s employment increased in December (6K) with a low unemployment rate of 4.6%.
Alberta’s Up Too!
Alberta is also coming around with WTI crude oil prices rising above US$60 per barrel and a falling unemployment rate of 6.9% in December. Alberta’s employment is UP 26K which is the strongest month-over-month gain in 5 years!
Prediction: March Rate Hike. Probably Not January.
Last year I noted the economic sweet spot Canada was in. This sweet spot refers to a window of non-inflationary economic growth. As our economy expands, so does our maximum economic output. The spread of economic output and maximum economic output potential will eventually shrink. As the economic output gap shrinks, there will be upward pressure on inflation and upward pressure on interest rates.
That said, a couple good months of data does not make a trend. However, the direction of this data is towards an eventual BoC rate hike.
P-L-E-A-S-E connect with me before locking in a fixed interest rate. For my past clients, we spoke of this eventual upward pressure of interest rates. Rates do go up, and they go down. Whatever is happening at this moment seems like the long-term direction. Rarely is that the case.
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Thank you!
Talk soon,
Chad Moore
