Canada’s latest employment numbers have reinvigorated the debate about Bank of Canada interest rate cuts.
The economy shed 2,200 jobs in March. That is not much, but it missed expectations for the addition of 25,000 jobs, and helped push the unemployment rate to 6.1%, from 5.8%. It is the highest jobless rate since January 2022.
Many market watchers see this as a firm indication that the Canadian economy is weakening and will increase pressure on the Bank of Canada to start trimming interest rates. There are wide spread expectations a cut will come in June, although some analysts had pushed their projections out to July.
Unfortunately, rate cuts are not likely to help affordability for the next couple of years.
Canada Mortgage and Housing Corporation’s latest housing market outlook is forecasting that this year could see a return to the record high home prices of 2022, with new peaks coming by 2026. Those expectations are based on the ongoing lag between housing starts and increasing demand.
CMHC says affordability will remain concern for the next three years, as declining mortgage rates and the strongest population growth since the 1950s will likely fuel a rebound in home sales and prices.
The agency expects sales levels through 2025 and 2026 to be slightly higher than the 10-year average, but remain below the record levels recorded in 2020 and 2021, due to high home prices.