Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.
The latest Canadian and U.S. employment numbers were released last Friday and they painted two distinct pictures of the current economic momentum in each country.
First, a quick recap. If you’re keeping an eye on mortgage rates, the Canadian and U.S. employment data matter because employment rates affect the cost of labour, which is one of the most important determinants of inflation, and inflation, in turn, is one of the most significant determinants of mortgage rates.
If labour markets are tight, the cost of labour rises and it doesn’t usually take long before prices, and mortgage rates, follow. Conversely, if labour markets are loose and there is an abundant supply of unused labour, increases in wages are moderated and an economy should be able to grow for some time without pushing up costs and rates. Each new labour report helps us calibrate where we currently stand on this spectrum.
That said, despite the importance of the data, we should be careful not to overreact to any one report because the employment numbers bounce around a lot from month to month and there are often material revisions to the initial numbers in subsequent months. Better to pay attention to the longer term employment trends, which paint a more reliable picture of how the labour supply/demand balance might impact our future mortgage rates.
With that in mind, here are the highlights from the latest Canadian employment report: