2 Jun

Q1 GDP Growth Was Bolstered by Tariff Reaction As Residential Construction and Resale Activity Weakened Further

General

Posted by: Jen Lowe

Q1 GDP Growth Was Bolstered by Tariff Reaction As Residential Construction and Resale Activity Weakened Further
Statistics Canada released Q1 GDP data showing a stronger-than-expected 2.2% seasonally adjusted annual rate, a tick above the pace of the quarter before. Exports drove growth as companies in the United States rushed to stockpile Canadian products before U.S. President Donald Trump imposed tariffs.

Growth was headlined by strong exports and inventory accumulation, as firms attempted to front-run deliveries ahead of the United States’ tariffs. Domestic demand remained muted. The expansion exceeded even the most optimistic economist’s projection in a Bloomberg survey and was above the Bank of Canada’s forecast for a 1.8% increase.

Total exports rose 1.6% in the first quarter of 2025 after increasing 1.7% in the fourth quarter of 2024. In the context of looming tariffs from the United States, exports of passenger vehicles (+16.7%) and industrial machinery, equipment and parts (+12.0%) drove the overall export increase in the first quarter of 2025. Meanwhile, there were lower exports of crude oil and crude bitumen (-2.5%) and refined petroleum energy products (-11.1%).

Imports increased 1.1% in the first quarter, following a 0.6% rise in the previous quarter. Higher imports of industrial machinery equipment and parts (+7.4%) and passenger vehicles (+8.3%) led the overall increase. The threat of tariffs can be expected to influence trading patterns and incite importers to increase shipments before these tariffs are implemented to avoid additional costs. At the same time, travel imports fell 7.0% in the first quarter, as fewer Canadians travelled to the United States.

Preliminary data also suggests some continued momentum at the start of the second quarter, with output rising 0.1% in April, led by the mining, oil and gas, and finance industries. March’s growth of 0.1%—which matched expectations—was also driven by resource extraction sectors. Oil and gas extraction, construction, retail, transportation, and warehousing led the growth.

One of the sectors hardest hit by trade uncertainty appeared to be manufacturing. The sector contracted in March for the first time in three months, and advance data also showed that manufacturing led the decreases in April.

Early tracking for the second quarter, assuming flat readings for May and June, points towards modest growth.

Traders in overnight swaps pared expectations for a 25 basis point cut at the Bank of Canada’s interest rate decision next Wednesday, putting the odds at about 15%.

Some of the gains in growth will likely be temporary, masking the slowdown in household consumption and business investment, which will likely worsen in the coming months. The household saving rate slowed to its lowest level since the first quarter of last year as increases in disposable income were lower than nominal household consumption expenditures. Residential investment fell, and business investment in non-residential structures declined. Final domestic demand — representing total final consumption expenditures and investments in fixed capital — didn’t increase for the first time since the end of 2023.

Residential investment decreased 2.8% in the first quarter. This was driven by an 18.6% decline in ownership transfer costs, representing resale market activity. This was the most significant decline in ownership transfer costs since the first quarter of 2022 (-34.8%), when a string of interest rate increases curbed housing resales. Despite a decline in resale activity, new construction rose 1.7% in the first quarter of 2025, led by increased work put in place for apartments, primarily in Ontario. Renovations (+0.5%) also edged up in the first quarter.

The first-quarter expansion is also likely to be the country’s most robust quarterly growth this year. The Bank of Canada and economists expect the economy to either grind to a halt or contract starting in the second quarter. Expected fiscal stimulus from Prime Minister Mark Carney’s government and the central bank’s resumption of rates are likely to help offset some of the damage posed by Trump’s tariffs.

Bottom Line

This is the last critical data report before the Bank of Canada meets again on Wednesday. Their decision will be a close call, but they will likely remain on the sidelines, keeping their powder dry before recessionary pressures force them to cut the overnight policy rate by at least another quarter point.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
20 May

Todays Inflation Report Poses a Conundrum for the Bank of Canada

General

Posted by: Jen Lowe

Today’s Inflation Report Poses a Conundrum for the Bank of Canada
The headline inflation report for April showed a marked slowdown in the Consumer Price Index (CPI), which rose a mere 1.7% year over year (y/y), down sharply from the 2.3% rise in March. The slowdown in April was driven by lower energy prices, which fell 12.7% following a 0.3% decline in March. Excluding energy, the CPI rose 2.9% in April, following a 2.5% increase in March.

Higher prices for travel tours (+6.7%) and food purchased from stores (+3.8%) moderated the slowdown in the CPI in April.

The CPI fell 0.1% in April, and it was down 0.2% on a seasonally adjusted monthly basis.

Gasoline led the decline in consumer energy prices, falling 18.1% y/y in April, following a 1.6% decline in March. The removal of the consumer carbon price tax mainly drove the price deceleration in April. Lower crude oil prices also contributed to the decline. Global oil demand decreased due to slowing international trade related to tariffs. In addition, supply from the Organization of the Petroleum Exporting Countries and its partners (OPEC+) increased.

Year over year, natural gas prices fell 14.1% in April after a 6.4% gain in March. The removal of the consumer carbon price contributed to the decline.

The dramatic decline in energy prices reflects the global economic slowdown caused by President Trump’s tariff mayhem.

The core inflation measures exceeded expectations last month, with the trimmed rate increasing to 3.1% y/y and the median rate rising to 3.2% y/y—above the target inflation range. The three-month moving average of the core rates rose to 3.4%, from 2.9% previously.

Food Prices Rose Sharply
In April, prices for food purchased from stores increased faster, increasing 3.8% year over year compared with 3.2% in March. Prices for food purchased from stores have grown faster than the all-items CPI for three consecutive months.

The most significant contributors to the year-over-year acceleration in April were fresh vegetables (+3.7%), fresh or frozen beef (+16.2 %), coffee and tea (+13.4 %), sugar and confectionery (+8.6%), and other food preparations (+3.2%).

Prices for food purchased from restaurants rose faster in April, increasing 3.6% yearly, following a 3.2% gain in March.

Excluding food and energy, this measure of core inflation rose a less troubling 2.6% y/y, up from 2.4%

CPI ex food & energy was less troubling at 2.6% y/y (up from 2.4%).

Another area reflecting trade war pressure is that vehicle prices rose 0.9% m/m, lifting the annual rate to almost 3%—these prices dipped 0.1% for all of 2024. Auto insurance also kicked in with an unhelpful 0.9% m/m rise, lifting the annual rate to 7.7%. In the meantime, shelter costs mostly moderated, partly due to the sharp fall in natural gas prices, but it was also helped by further moderation in mortgage interest costs (6.8% y/y vs 7.9%). However, rents perked back up slightly to 5.2% y/y, after slipping for most of the past year from a peak of nearly 9%.

Bottom Line

This report will reinforce the Bank of Canada’s cautious stance on easing to mitigate the impact of tariffs. Traders in overnight swaps lowered bets that the central bank will cut rates at its next meeting, putting the odds under 40% compared with nearly 70% before the release.

It will be a close call for the Bank of Canada, but even if they don’t cut rates in June, more rate cuts this year are likely.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
15 May

Canadian Home Sales Unchanged in April

General

Posted by: Jen Lowe

Global Tariff Uncertainty Sidelines Buyers
Canadian existing home sales were unchanged last month as tariff concerns again mothballed home-buying intentions, mainly in the GTA and GVA where sales have declined for months. Consumer confidence has fallen to rock-bottom levels as many fear the prospect of job losses and higher prices.

The number of sales recorded over Canadian MLS® Systems was unchanged (-0.1%) between March and April 2025, marking a pause in the trend of declining activity since the beginning of the year. (Chart A)

Demand is currently hovering around levels seen during the second half of 2022, and the first and third quarters of 2023.

“At this point, the 2025 Canadian housing story would best be described as a return to the quiet markets we’ve experienced since 2022, with tariff uncertainty taking the place of high interest rates in keeping buyers on the sidelines,” said Shaun Cathcart, CREA’s Senior Economist. “Given the increasing potential for a rough economic patch ahead, the risk going forward will be if an average number of people trying to sell their homes turns into a large number of people who have to sell their homes, and that’s something we have not seen in decades.”

New ListingsNew supply declined by 1% month-over-month in April. Combined with flat sales, the national sales-to-new listings ratio climbed to 46.8% compared to 46.4% in March. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings between 45% and 65% generally consistent with balanced housing market conditions.

At the end of April 2025, 183,000 properties were listed for sale on all Canadian MLS® Systems, up 14.3% from a year earlier but still below the long-term average of around 201,000 listings for that time of the year.

“The number of homes for sale across Canada has almost returned to normal, but that is the result of higher inventories in B.C. and Ontario, and tight inventories everywhere else,” said Valérie Paquin, CREA Chair.

There were 5.1 months of inventory on a national basis at the end of April 2025, which is in line with the long-term average of five months. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months and a buyer’s market above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) declined 1.2% from March to April 2025. The non-seasonally adjusted National Composite MLS® HPI was down 3.6% compared to March 2024.

The National Composite MLS® Home Price Index (HPI) declined 1.2% from March to April 2025. The non-seasonally adjusted National Composite MLS® HPI was down 3.6% compared to March 2024.

Bottom Line

Before the tariff threats emerged, the housing market was poised for a strong rebound as the spring selling season approached.

Unfortunately, the situation has only deteriorated as business and consumer confidence have fallen sharply. While the first-round effect of tariffs is higher prices as importers attempt to pass off the higher costs to consumers, second-round effects slow economic activity, reflecting layoffs and business and household belt-tightening.

The Bank of Canada refrained from cutting the overnight policy rate for fear of tariff-related price hikes. Since then, Canadian labour markets have softened, and preliminary evidence suggests that economic activity will weaken further in recent months, despite a rollback in tariffs with China, at least temporarily.

While homebuyers are leery, real housing bargains are increasingly prevalent as supplies rise and home prices fall. Sellers are increasingly motivated to make deals, and pent-up demand is growing. Outside of the GTA and GVA, sales have remained positive.

We expect the Bank of Canada to cut the overnight rate again on June 4 as long as next week’s April inflation data are reasonably well behaved, which should be the case given the sharp fall in energy prices.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
15 May

Refinancing your Mortgage in 2025!

General

Posted by: Jen Lowe

Refinancing Your Mortgage in 2025.

Refinancing your mortgage can be a smart financial move for many reasons, and as your trusted mortgage advisor, I’ve seen how much it can benefit homeowners!

Ideally, refinancing is done at the end of your mortgage term to avoid penalties, but the timing can vary depending on your goals. For some, it’s about unlocking the equity in their home to fund renovations or cover big expenses like college tuition. For others, it’s an opportunity to consolidate debt, lower their interest rate, or change up their mortgage product.

Let’s take a closer look at some of the ways refinancing your mortgage can help!

  • Get a Better Rate: As interest rates have continued to decrease with the Bank of Canada updates these past few months, now is a great time to consider refinancing for a better rate and lower overall mortgage payments!  Experts anticipate the Bank of Canada will move to have the overnight rate down to 4.0% at year-end and potentially down to 2.75% for 2025.
  • Consolidate Debt: When it comes to renewal season and considering a refinance, this is a great time to review your existing debt and determine whether or not you want to consolidate it onto your mortgage. In most cases, the interest rate on your mortgage is less than you would be charged with credit card companies or other forms of financing you may have. Plus, having all your debt consolidated into a single payment can keep you on track!
  • Unlock Your Home Equity: Do you have projects around the house you’ve been dying to get started on? Need funds for a large purchase such as a new vehicle or post-secondary education? When you are looking to renew your mortgage, it is a great opportunity to consider refinancing in order to take advantage of the home equity you have built up to help with these larger changes in your life!
  • Change Your Mortgage Product: Are you unhappy with your existing mortgage product? If you have a variable-rate or adjustable-rate mortgage, you may be considering locking it in at the lower rates. Alternatively, you may want to switch your current fixed-rate mortgage to a variable option with the interest rates expected to continue decreasing into 2025. You can also utilize your refinance to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

PLUS! Some latest changes by the Government of Canada will make it even easier for you when it comes to your renewal and refinancing options:

  • Those of you who may have an uninsured mortgage will no longer have to pass the stress test as of November 21st. This means that you have more flexibility when it comes to rates and mortgage products in renewal cases where you wish to switch lenders without adding additional funds to your mortgage!

No matter your plans or situation, please don’t hesitate to reach out!

13 May

Canadian Unemployment Rate Rose to 6.9% in April

General

Posted by: Jen Lowe

Manufacturing Employment Plunged as Tariffs Weakened the Economy
Today’s Labour Force Survey for April showed a marked adverse impact of tariffs on the Canadian economy. Early evidence suggests that the slowing economy will be the primary fallout of tariffs, with upward pressure on prices a secondary impact. The central bank’s actions will mitigate inflation while gradually lowering interest rates. Today’s weak report sets the stage for a 25 bps rate cut on the June 4th decision date.

Overall employment changed little in April (+7,400; +0.0%), following a decline in March (-33,000; -0.2%) and virtually no change in February.

Following a decline of 0.2 percentage points in March, the employment rate—the proportion of the population aged 15 and older—fell a further 0.1 percentage points in April. This increased the employment rate to 60.8%, matching a recent low in October 2024.

The employment rate trended down for most of 2023 and 2024, as population growth outpaced employment gains. More recently, it increased for three consecutive months from November 2024 to January 2025, driven by strong employment gains amid slower population growth.

Public sector employment increased by 23,000 (+0.5%) in April, following three consecutive months of little change. This growth was associated with temporary hiring for the federal election.

The number of private-sector employees was little changed in April, following a decline in March (-48,000; -0.3%). Self-employment was little changed for a third consecutive month in April.

The unemployment rate rose 0.2 percentage points to 6.9% in April, following an increase of 0.1 percentage points in March. With these increases, the unemployment rate has returned to its level of November 2024, which was the highest since January 2017 (excluding the years 2020 and 2021, during the COVID-19 pandemic).

The number of unemployed people—those looking for work or on temporary layoff—increased by 39,000 (+2.6%) in April and was up by 189,000 (+13.9%) year over year.
Unemployed people faced more difficulties finding work in April than a year earlier. Among those unemployed in March, 61.0% remained unemployed in April, higher than the corresponding proportion for the same months in 2024 (57.3%) (not seasonally adjusted).

The share of workers being laid off may increase during periods of economic downturn or disruption. Among those employed in March 2025, 0.7% had become unemployed in April due to a layoff. This proportion changed little from the same period in 2024 (0.6%) (not seasonally adjusted).

There were more people in the labour force in April, and the participation rate—the proportion of the population aged 15 and older who were employed or looking for work—increased by 0.1 percentage points to 65.3%. Despite the increase in the month, the participation rate was down 0.4 percentage points on a year-over-year basis.

Total hours worked increased 0.4% in April and were up 0.9% compared with 12 months earlier.

Average hourly wages among employees increased 3.4% (+$1.20 to $36.13) year-over-year in April, following growth of 3.6% in March (not seasonally adjusted).

Employment fell in manufacturing (-31,000; -1.6%) in April, as the industry continues to face uncertainty related to tariffs on exports to the United States. Ontario posted the most significant decline (-33,000; -3.9%) in this industry among the provinces. This was the first significant decline for manufacturing employment at the national level since November 2024. Despite the decrease in the month, employment in manufacturing changed little on a year-over-year basis in April.

Wholesale and retail trade employment declined by 27,000 (-0.9%) in April, following a similarly sized decline in March (-29,000; -1.0%). The decline over the two months offset the substantial gain recorded in February. On a year-over-year basis, wholesale and retail trade employment changed little in April.

Chart 3 
Employment down in manufacturing in April

Employment rose in public administration (+37,000; +3.0%) in April, the first significant increase for the sector since July 2024. The increase was mostly in temporary work and coincided with activities associated with the federal election. Advanced polling took place from April 18 to April 21 and the election was held on April 28. The Labour Force Survey (LFS) reference week was April 13 to April 19.

In finance, insurance, real estate, rental and leasing, employment increased by 24,000 (+1.6%) in April, continuing an upward trend from October 2024, with cumulative gains during this period totalling 67,000 (+4.7%).

Bottom Line

Statistics Canada assessed the proportion of employees anticipating layoffs. Not surprisingly, employees in industries dependent on US demand for Canadian exports were more likely to anticipate layoffs. Job insecurity causes people to tighten their belts.

April is the third month in a row that the Canadian economy has seen very little change in employment or job losses, underscoring a slowdown in hiring or downsizing amid trade uncertainty. It’s also the first month that the tariff impact on export-dependent jobs in auto, steel, aluminum, and other sectors becomes more evident.

Ontario, the country’s factory heartland, saw the steepest plunge in this industry among the provinces. In Windsor, the auto industry hub, the unemployment rate jumped 1.4 percentage points to 10.7%, the highest among 20 of Canada’s largest metropolitan areas.

Traders in overnight swaps upped their bets for a rate cut at the Bank of Canada’s next decision on June 4, putting the odds at just over a coin flip after the release.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
29 Apr

What the 2025 Federal Election Means for you as a Homebuyer

General

Posted by: Jen Lowe

🏡 What the 2025 Federal Election Means for You as a Homebuyer

Canada’s 2025 federal election is over, and the Liberals have been re-elected under Mark Carney — but with a minority government. That means they’ll need support from other parties (like the NDP or Bloc) to get major policies passed.

So what does that mean for you — as a homebuyer, homeowner, or someone looking to get into the market?

As a mortgage broker with over 13 years of experience, here’s my no-fluff breakdown of how this all impacts housing, affordability, and your next move.


⚠️ First, What a Minority Government Means for the Market

A minority government adds a layer of uncertainty — but also accountability. Policies can still move forward, but they need wider political support.

What this means for you:

  • Big promises (like housing, tax reform, and infrastructure) are on the table — but expect slower rollouts, more compromise, and the occasional political delay.

  • From a mortgage and economic perspective, this setup could keep interest rates stable in the near term, as the government is unlikely to introduce major surprise shifts without support.

So while the direction is set, the pace of change will depend on collaboration in Ottawa.


🔨 Big Plans to Build — Will They Help?

One of the boldest promises? Build 500,000 new homes per year.
(For context: we’ve never hit that number before.)

The plan includes:

  • $25 billion “Build Canada Homes” program to purchase and place prefab housing on public land.

  • $6 billion to help cities cut development charges on multi-unit residential buildings.

  • $10 billion for affordable housing programs, including support for students, seniors, and underserved groups.

Bottom line:
If successful, this could help ease the housing crunch, increase supply, and stabilize prices. But prefab housing makes up just 1% of today’s supply — scaling that up won’t be fast or easy.


🏗️ Faster Approvals & Stronger Infrastructure

Delays in building approvals have long been a problem. This government wants to change that.

  • A new Major Federal Projects Office will limit permitting delays to 2 years max.

  • Overlapping assessments will be cut by recognizing provincial and Indigenous-led reviews.

  • $11.8 billion in trade infrastructure (roads, ports, bridges) to support growing communities.

Why it matters:
Faster approvals = more shovels in the ground = more homes coming to market sooner.


💵 Tax Relief & Budget Control

Some tax and spending updates that could affect your bottom line:

  • Lowest tax bracket drops from 15% to 14% — a little more take-home income.

  • No increase to capital gains taxes, a relief for real estate investors.

  • Federal spending growth slows from 9% to 2%, with a focus on efficiency and reduced consultant costs.

These steps suggest a more stable economic outlook — which is good for long-term planning, borrowing, and investment confidence.


🏘️ What It All Means for Buyers

With the Liberals in a minority, expect more negotiation, fewer surprises, and moderate pace in rolling out housing programs.

Here’s what you can take away:

More homes are in the pipeline, especially in the new build and prefab space.
Permitting timelines could improve, speeding up housing projects.
Tax changes are small but positive, supporting affordability.
Market conditions may remain stable, at least in the near term.


📞 Let’s Talk Strategy

Whether you’re a first-time buyer, upsizing, or refinancing — now is the time to get clear on your goals and strategy. Even in a shifting political environment, there are real opportunities to position yourself ahead of the curve.

Want to know how this political landscape impacts your mortgage options or timing to buy?

Let’s connect.


Jen Lowe
Mortgage Broker | 13+ Years of Experience
📞 250-217-4925
📧 jen@jenlowe.ca

21 Apr

Bank of Canada Holds Rates Steady In The Face Of Tariff Uncertainty–More Rate Cuts Coming

General

Posted by: Jen Lowe

Bank of Canada Holds Rates Steady In The Face Of Tariff Uncertainty–More Rate Cuts Coming
The Bank of Canada held its benchmark interest rate unchanged at 2.75% at today’s meeting, as expected by half of the market, to mark the first hold following 225 basis points of cuts in seven consecutive decisions. The governing council noted that the unpredictability of the magnitude and duration of tariffs posed downside risks to growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.

The higher uncertainty stemmed from the United States’ lack of a clear tariff path, prompting the BoC Governing Council to present two economic scenarios in its latest Monetary Policy Report. Should the US limit the scope of its tariffs on Canada, the BoC expects growth to temporarily weaken and inflation to hold near the 2% target. Should the US proceed with an all-out trade war with Canada and China, the BoC has pencilled in a recession this year, and inflation rising temporarily above 3% next year.

Of course, as the Bank stated in its press release, “Many other trade policy scenarios are possible. There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in US trade policy are unprecedented.”

The statement says, “Serial tariff announcements, postponements, and continued threats of escalation have roiled financial markets. This extreme market volatility is adding to uncertainty. Oil prices have declined substantially since January, mainly reflecting weaker prospects for global growth. Canada’s exchange rate has recently appreciated as a result of broad US dollar weakness.”

The Bank says in these very unusual times, “In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.

Inflation was 2.3% in March, lower than in February but still higher than 1.8% at the time of the January Monetary Policy Report (MPR). The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of the GST/HST. Starting in April, CPI inflation will be pulled down for one year by the removal of the consumer carbon tax. Lower global oil prices will also dampen inflation in the near term. However, we expect tariffs and supply chain disruptions to push up some prices. How much upward pressure this puts on inflation will depend on the evolution of tariffs and how quickly businesses pass on higher costs to consumers. Short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions. Longer-term inflation expectations are little changed.

Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well-controlled.

The Governing Council will proceed carefully, paying particular attention to the risks and uncertainties facing the Canadian economy. These include the extent to which higher tariffs reduce demand for Canadian exports, how much this spills over into business investment, employment, and household spending, how much and how quickly cost increases are passed on to consumer prices, and how inflation expectations evolve.

Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.”

Bottom Line

The US is determined to impose worldwide tariffs, disproportionately hitting Canada, Mexico, and China, the US’s top trading partners. This is a misguided neo-Mercantilist policy. Mercantilism assumes that the global economic pie is fixed, so if one country prospers, another must fail. This idea of a zero-sum game was debunked in the 18th century by Adam Smith and others who showed that if countries have a competitive advantage in various products and services, all are better off by producing and trading those products with the rest of the world. It is not a zero-sum game. The economic pie grows with trade. This was the idea behind globalization and the USMCA free trade agreement.

Given Canada’s vulnerability to tariffs, the economy will suffer more than the US, which has a relatively closed economy (where exports are a small proportion of GDP). Prices will rise depending on the duration and size of the coming tariffs, but mitigating the inflation will be the weakness in economic activity. Stagflation, a buzzword from the 1970s, is back in the lexicon.

We expect the BoC to resume cutting the policy rate in 25-bps increments until it reaches 2.0%-to-2.25% this summer, triggering a rebound in home sales. Layoffs and spending cuts will dampen sentiment, but lower interest rates will bring buyers off the sidelines. Housing inventories have risen sharply with new condo supply and a marked rise in the new listings of existing homes, and home prices are falling.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
4 Apr

Weak Canadian Job Creation is the First Fallout from the Trade War

General

Posted by: Jen Lowe

Weak Canadian Job Creation Is The First Fallout From The Trade War
Today’s Labour Force Survey for March was weaker than expected. Employment decreased by 33,000 (-0.2%) in March, the first decrease since January 2022. The decline in March followed little change in February and three consecutive months of growth in November, December and January, totalling 211,000 (+1.0%).

The employment rate—the proportion of the population aged 15 and older—fell 0.2 percentage points to 60.9% in March. This partially offsets an increase of 0.3 percentage points observed from October 2024 to January 2025.

Private sector employment fell by 48,000 (-0.3 %) in March, following little change in February and a cumulative increase of 97,000 (+0.7%) from November 2024 to January 2025. On a year-over-year basis, the number of employees in the private sector was up by 175,000 (+1.3%).

Public sector employment was little changed for a third consecutive month in March, up 92,000 (+2.1%) compared with a year earlier. Self-employment was also little changed in March, up 81,000 (+3.0%) on a year-over-year basis.

Economists expected the trade war to weigh on the Canadian labour market in March. Market participants expected zero employment gains as steel & aluminum tariffs hit jobs in the sector. While we haven’t seen broad-based layoffs yet, automaker Stellantis NV temporarily halted production at assembly plants in Windsor, ON and Mexico, laying off 3,200 people in Canada, 2,600 in Mexico and 900 at six U.S. factories. The pressure from those and broader non-USMCA-compliant tariffs was expected to drive stagnant job growth in the month. At 6.7%, the jobless rate met expectations, still two ticks shy of November’s cycle high.

Employment could experience a further downside over the coming months, depending on how the tariff backdrop evolves. Average hours worked could see an even bigger hit as work-sharing programs come into effect due to pressure on manufacturing production.

The unemployment rate rose 0.1 percentage points to 6.7% in March, the first increase since November 2024. It had trended up from 5.0% in March 2023 to a recent high of 6.9% in November 2024 before falling by 0.3 percentage points from November 2024 to January 2025 in the context of robust employment growth at the end of 2024 and in early 2025.

Since March 2024, the unemployment rate has remained above its pre-COVID-19 pandemic average of 6.0% (from 2017 to 2019).

In total, 1.5 million people were unemployed in March, up 36,000 (+2.5%) in the month and up 167,000 (+12.4%) year over year.

Among those unemployed in February, 14.7% became employed in March. This was lower than the corresponding proportion in March 2024 (18.6%) (not seasonally adjusted).

Long-term unemployment has also risen; the proportion of unemployed people searching for work for 27 weeks or more stood at 23.7% in March 2025, up from 18.3% in March 2024.

Total hours worked rose 0.4% in March, following a decline of 1.3% in February. On a year-over-year basis, total hours worked were up 1.2%.

Average hourly wages among employees were up 3.6% (+$1.24 to $36.05) year over year in March, following growth of 3.8% in February (not seasonally adjusted).

Fewer people are employed in wholesale and retail trade, information, culture, and recreation.

Wholesale and retail trade employment fell by 29,000 (-1.0 %) in March, partly offsetting an increase of 51,000 in February. On a year-over-year basis, the number of people working in wholesale and retail trade was little changed in March.

Chart 3 
Employment declines led by wholesale and retail trade in March

Following five months of little change, employment in information, culture, and recreation decreased by 20,000 (-2.4%) in March. Despite the decline, employment in this industry changed little on a year-over-year basis.

In March, employment also fell in agriculture (-9,300; -3.9%), while there were gains in “other services” (such as personal and repair services) (+12,000; +1.5%) and in utilities (+4,200; +2.8%).

Bottom Line

US employment data for March were also released this morning. In direct contrast to Canada, US job growth beat forecasts in March, and the unemployment rate edged up, pointing to a healthy labour market before the global economy gets hit by widespread tariffs.

Canada’s job market stalled in March, shedding the most jobs in over three years. The job loss was the first in eight months, with trade-exposed sectors driving some declines.

The threats and implementation of US President Donald Trump’s tariffs and Canada’s retaliating levies have weighed on the Canadian jobs market over the past two months. However, with the country dodging the latest round of so-called reciprocal tariffs this week, the Bank of Canada may have more time to weigh economic weakness against rising price pressures.

Stocks have fallen the most since March 2020–the beginning of Covid, and bonds are rallying causing market-driven interest rates to drop precipitously. The Bank of Canada meets again on April 16. The day before, Canadian inflation data for March will be released. This will be a crucial report as the central bank assesses the tug-of-war between tariff-induced inflation and unemployment. Currently, traders are betting there is only a 33% chance of a 25 bps rate cut later this month. While the BoC might take a pass this month, the coming slowdown in the Canadian economy will warrant rate cuts in June, if not sooner.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
17 Mar

Canadian Home Sales plunged in February, spooked by tariff concerns

General

Posted by: Jen Lowe

Global Tariff Uncertainty Sidelined Buyers
Canadian existing home sales plunged last month as tariff concerns moth-balled home buying intentions.

According to data released Monday by the Canadian Real Estate Association, transactions fell 9.8% from January. Activity was at its lowest level since November 2023. Benchmark home prices declined 0.8%, and new listings plunged, more than reversing January’s gains. Housing continues to struggle despite the dramatic easing by the Bank of Canada, which took overnight rates down from 5% in June 2024 to 2.75% today, its lowest level since September 2022.

Were it not for the US announcement on January 20 that it would impose 25% tariffs on Canadian and Mexican goods, housing markets would be headed into a strong Spring season. While we believe that rates will fall substantially further, a strong housing recovery awaits further clarity on the economic outlook. We have revised down our growth estimates for the first and second quarters of this year, raising the prospects for a recession.

The trade war with the US has sharply raised uncertainty. Labour markets are tightening, stocks have sold off sharply, and interest rates are falling. Tariffs will also boost inflation, causing the central bank to ease cautiously.

“The moment tariffs were first announced on January 20, a gap opened between home sales recorded this year and last. This trend continued to widen throughout February, leading to a significant, but hardly surprising, drop in monthly activity,” said Shaun Cathcart, CREA’s Senior Economist. “This is already reflected in renewed price softness, particularly in Ontario’s Greater Golden Horseshoe region.”

Declines were broad-based, with sales falling in about three-quarters of all local markets and in almost all large markets. The trend was most pronounced in the Greater Toronto Area and surrounding Great Golden Horseshoe regions.

New Listings

With sales down amid a surge in new supply, the national sales-to-new listings ratio fell to 49.3% compared to readings in the mid-to-high 50s in the fourth quarter of last year. The long-term average for the national sales-to-new listings ratio is 55%, with readings between 45% and 65% generally consistent with balanced housing market conditions.

At the end of January 2025, close to 136,000 properties were listed for sale on all Canadian MLS® Systems, up 12.7% from a year earlier but still below the long-term average of around 160,000 listings for that time of the year.

“While we continue to anticipate a more active spring for the housing sector, the threat of a trade war with our largest trading partner is a major dark cloud on the horizon,” said James Mabey, CREA Chair. “While uncertainty about the economy and jobs will no doubt keep some prospective buyers on the sidelines, a softer pricing environment alongside lower interest rates will be an opportunity for others.”

At the end of February 2025, 146,250 properties were listed for sale on all Canadian MLS® Systems, up 13.1% from a year earlier but still below the long-term average of around 174,000 listings for that time of the year.

“The uncertainty of the last few weeks seems to be causing some buyers to think twice about big financial decisions right now,” said James Mabey, CREA Chair. “A softer pricing environment and lower interest rates will be a buying opportunity for others.”

There were 4.2 months of inventory nationally at the end of January 2025, up from readings in the high threes in October, November, and December. The long-term average is five months of inventory. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months and a buyer’s market above 6.5 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) declined by 0.8% from January to February 2025, marking the largest month-over-month decrease since December 2023.

The renewed price softening was most notable in Ontario’s Greater Golden Horseshoe region.

The non-seasonally adjusted National Composite MLS® HPI was down 1% compared to February 2024.

Bottom Line

Before the tariff threats emerged, the housing market seemed poised for a strong rebound as the spring selling season approached.

Unfortunately, the situation has only deteriorated, particularly as President Trump has repeatedly suggested that Canada could become the 51st state, further angering Canadians. While the first-round effect of tariffs is higher prices as importers attempt to pass off the higher costs to consumers, second-round effects slow economic activity reflecting layoffs and business and household belt-tightening.

The Bank of Canada will no doubt come to the rescue slashing interest rates further. This is particularly important for Canada where interest-rate sensitivity is far higher than in the US.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
3 Feb

No one benefits from Tariffs

General

Posted by: Jen Lowe

 

No one Benefits From Tariffs

 

Despite having negotiated the current trade agreement among the U.S., Mexico, and Canada during his first administration, Donald Trump broke the terms of that treaty on Saturday. He triggered a global stock market selloff after fulfilling his threat to impose tariffs on Canada, Mexico, and China. These levies are set to take effect Tuesday unless a last-minute deal is reached during Trump’s phone calls with the leaders of Canada and Mexico today. The European Union is next on Trump’s list for potential tariffs, and the EU has promised to “respond firmly” if this occurs.

 

Trump has imposed tariffs of 25% on goods coming from Mexico and Canada, 10% on Canadian energy, and 10% on goods from China. He justified these actions by claiming they would force Mexico and Canada to address issues related to undocumented migration and drug trafficking. However, while precursor chemicals for fentanyl come from China and undocumented migrants enter through the southern border with Mexico, Canada accounts for only about 1% of both issues.

 

The affected countries are preparing their responses. Canada has launched a crisis plan reminiscent of its response to the COVID-19 pandemic, while Mexican President Claudia Sheinbaum has developed a “Plan B” to protect her country. In contrast, China’s response has been more subdued. It pledged to implement “corresponding countermeasures” without providing further details.

 

The Wall Street Journal, typically considered a conservative publication, criticized Trump, labeling this as the “dumbest trade war in history.” The Journal stated, “Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in or one that we should want to live in, as Mr. Trump may soon find out.”

 

Trump inherited a strong economy from his predecessor, President Joe Biden. However, as White House Press Secretary Karoline Leavitt confirmed Trump’s decision to levy the tariffs on Friday, the stock market plunged. Trump, who previously insisted that tariffs would boost the economy, acknowledged today that Americans might experience “SOME PAIN” due to the tariffs. He added, “BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

 

Trump has admired tariffs and often praises President McKinley for his extensive tariff impositions. After 450 amendments, the Tariff Act of 1890 raised average import duties from 38% to 49.5%. McKinley, known as the “Napoleon of Protection,” increased rates on some goods while lowering them on others, always aiming to protect American manufacturing interests. His presidency saw rapid economic growth, bolstered by the 1897 Dingley Tariff, which aimed to shield manufacturers and factory workers from foreign competition.

 

While Trump claims the McKinley tariffs made the U.S. a global economic leader, other factors contributed to this outcome. During the late 19th century, U.S. immigration surged, and American entrepreneurs learned from Britain’s best practices, which was then the world leader in technological advancement.

 

Consider the U.S. auto industry, which operates as a North American entity due to the highly integrated supply chains across the three countries. In 2024, Canada supplied nearly 13% of U.S. auto parts imports, while Mexico accounted for almost 42%. Industry experts note that a vehicle produced on the continent typically crosses borders multiple times as companies source components and add value most cost-effectively.

 

This integration benefits everyone involved. According to the Office of the U.S. Trade Representative, the industry contributed more than $809 billion to the U.S. economy in 2023, representing about 11.2% of total U.S. manufacturing output and supporting 9.7 million direct and indirect U.S. jobs. In 2022, the U.S. exported $75.4 billion in vehicles and parts to Canada and Mexico. According to the American Automotive Policy Council, this figure rose by 14% in 2023, reaching $86.2 billion.

 

Without this trade, American car makers would struggle to compete. Regional integration has become an industry-wide manufacturing strategy in Japan, Korea, and Europe. It aims to leverage high-skilled and low-cost labour markets to source components, software, and assembly.

 

As a result, U.S. industrial capacity in automobiles has grown alongside an increase in imported motor vehicles, engines, and parts. From 1995 to 2019, imports of these items rose by 169%, while U.S. industrial capacity in the same categories increased by 71%. Thousands of well-paying auto jobs in states like Texas, Ohio, Illinois, and Michigan owe their competitiveness to this ecosystem, which relies heavily on suppliers in Mexico and Canada.

 

Tariffs will also disrupt the cross-border trade of agricultural products. In fiscal 2024, Mexican food exports represented about 23% of U.S. agricultural imports, while Canada supplied approximately 20%. Many leading U.S. growers have relocated to Mexico because of regulatory limits and economic advantages. Unless a last-minute deal is reached during Trump’s calls with the leaders of Canada and Mexico today. The European Union is next on its list for potential tariffs, and the EU has promised to “respond firmly” if this occurs.

Trump slapped tariffs of 25% on goods from Mexico and Canada, 10% on Canadian energy, and 10% on goods from China. He said he was doing so to force Mexico and Canada to do more about undocumented migration and drug trafficking. Still, while precursor chemicals to make fentanyl come from China and undocumented migrants come over the southern border with Mexico, Canada accounts for only about 1% of both.

 

The countries affected by the tariffs are also preparing their defences. Canada has launched a crisis response that parallels the COVID pandemic, while Mexican President Claudia Sheinbaum has developed a “Plan B” to protect her country. China’s reaction was more subdued. They pledged to implement “corresponding countermeasures,” though they did not provide further details.

The Wall Street Journal, hardly a bastion of progressive thought, lambasted Trump, saying this is the “dumbest trade war in history.” The Journal said, “Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in or one that we should want to live in, as Mr. Trump may soon find out.”

Trump inherited the best economy in the world from his predecessor, President Joe Biden. However, on Friday, as soon as White House press secretary Karoline Leavitt confirmed that Trump would levy the tariffs, the stock market plunged. Trump, who during his campaign insisted that tariffs would boost the economy, said that Americans could feel “SOME PAIN” from them. He added, “BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

Trump loves tariffs and lauds President McKinley for his massive tariff imposition. After 450 amendments, the Tariff Act of 1890 increased average duties across all imports from 38% to 49.5%. McKinley was known as the “Napoleon of Protection,” and rates were raised on some goods and lowered on others, always trying to protect American manufacturing interests. McKinley’s presidency saw rapid economic growth. He promoted the 1897 Dingley Tariff to protect manufacturers and factory workers from foreign competition, and in 1900, secured the passage of the Gold Standard Act.

President Trump has said the McKinley tariffs made the US a global economic leader, but much else was responsible. Over the late 19th century, US immigration increased sharply. American entrepreneurs put a great store in the best practices of Britain, then the global leader in technological development.

The U.S. auto industry is  North American because supply chains in the three countries are highly integrated. In 2024, Canada supplied almost 13% of U.S. auto parts imports, and Mexico provided nearly 42%. Industry experts say a vehicle made on the continent crosses borders a half-dozen times or more as companies source components and add value in the most cost-effective ways.

Everyone benefits. The Office of the U.S. Trade Representative says that 2023 the industry added more than $809 billion to the U.S. economy, or about 11.2% of total U.S. manufacturing output, supporting “9.7 million direct and indirect U.S. jobs.” In 2022, the U.S. exported $75.4 billion in vehicles and parts to Canada and Mexico. According to the American Automotive Policy Council, that number jumped 14% in 2023 to $86.2 billion.

American car makers would be much less competitive without this trade. Regional integration is now an industry-wide manufacturing strategy employed in Japan, Korea, and Europe that aims to source components, software, and assembly from various high-skilled and low-cost labour markets.

The result has been that U.S. industrial capacity in autos has grown alongside an increase in imported motor vehicles, engines, and parts. From 1995 to 2019, imports of automobiles, engines, and parts rose 169%, while U.S. industrial capacity in cars, engines, and parts rose 71%. Thousands of good-paying auto jobs in Texas, Ohio, Illinois, and Michigan owe their competitiveness to this ecosystem, which relies heavily on suppliers in Mexico and Canada.

Tariffs will also cause mayhem in the cross-border trade of farm goods. In fiscal 2024, Mexican food exports comprised about 23% of U.S. agricultural imports, while Canada supplied some 20%. Many top U.S. growers have moved to Mexico because limits on legal immigration have made it hard to find workers in the U.S. Mexico now supplies 90% of avocados sold in the U.S.

Canadian Prime Minister Justin Trudeau has promised to respond to U.S. tariffs on a dollar-for-dollar basis. Since Canada’s economy is so small, this could result in a larger GDP hit, but American consumers will feel the bite of higher costs for some goods.

None of this is supposed to happen under the U.S.-Mexico-Canada trade agreement that Mr. Trump negotiated and signed in his first term. The U.S. willingness to ignore its treaty obligations, even with friends, won’t make other countries eager to do deals. Maybe Mr. Trump will claim victory and pull back if he wins some token concessions. But if a North American trade war persists, it will qualify as one of the dumbest in history.

Bottom Line

This is a lose-lose situation. Prices will rise in all three continental countries if the tariffs persist. While inflation is the first effect, we will quickly see layoffs in the auto sector and elsewhere. Ultimately, the Bank of Canada would be confronted with a recession and will ease monetary policy in response. Interest rates would fall considerably. The Canada 5-year government bond yield has fallen precipitously, down to 2.59%. In this regard, housing activity would pick up, similar to what we saw in 2021, with weak economic activity but booming housing in response to low mortgage rates.

I am still hopeful that an all-out trade war can be averted. There is room to negotiate. As stated by Rob McLister, “Trump underestimates the global revolt against this move, and that’s another reason why these tariffs may be measured in months, not years.” This will not be good for the US. Trump promised to reduce prices, yet sustained tariffs will undoubtedly cause prices to rise. Some of that increase will be absorbed by American importers and some by Canadian exporters anxious to maintain market share. Still, much of the tariff will be passed on to the American consumer in time. This, combined with a North American economic slowdown, will no doubt damage Mr. Trumps approval rating.

Courtesy of Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres