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 reports were released last week and both were mixed.
Canadian employment rose by 29,400 jobs, recovering a good chunk of the 46,000 jobs we lost in December. Looking at the longer-term trend, we see that our economy has now created an average of 15,000 new jobs per month over the most recent six months, which is fewer than the 20,000 new jobs per month that we need just to keep pace with our population growth.
Here are the other highlights from the most recent report, with my take on each one:
U.S employment rose by 113,000 new jobs in January. This is the second month in a row that the U.S. jobs data have disappointed (only 75,000 new U.S. jobs were created in December). While the December report was dismissed by many as a one off that was primarily due to bad weather, the January data were seen as being less influenced by one-off factors. The U.S. labour market has created an average of 175,000 new jobs per month over the most recent six months, which is a little above the 150,000 new jobs per month that the U.S. economy needs to keep pace with the natural expansion of its labour force.
Here are the highlights from the latest U.S. employment data, with my take on each one:
Five-year Government of Canada bond yields rose by three basis points last week, closing at 1.6% on Friday. Fixed rates fell in response again last week and lender competition continues to heat up in advance of the spring market. Borrowers who are putting down at least 20% on the purchase of a new home should be able to find a five-year fixed rate in the 3.14% range and borrowers who are putting down less than 20% can now find five-year fixed rates for as low as 3.04% (albeit with more limited terms and conditions).
Five-year variable-rate mortgages are offered at rates as low as prime minus 0.65%, which works out to 2.35% using today’s prime rate of 3.00%.
The Bottom Line: The January Canadian and U.S. employment data provide insight into the employment trends in both countries. While working Canadians are incrementally better off because average incomes are rising faster than prices, our employment growth momentum continues to slow. Meanwhile, the purchasing power of the average working American isn’t rising as quickly, relative to prices, as in Canada, but U.S. employment growth trends are more encouraging.
Overall, these latest job reports should not substantially alter the plans of either the U.S. Federal Reserve or the Bank of Canada. From a mortgage-rate perspective, that means steady as she goes.
David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog (movesmartly.com) and on his own blog integratedmortgageplanners.com/blog). Email Dave