Stronger-Than-Expected Jobs Data and Easing Inflation: What Does It Mean for Mortgage Holders?

The Canadian economy has had a surprising turn of events in September, bringing both a boost in employment and a further slowdown in inflation. Statistics Canada reported a robust increase of 46,700 jobs last month, reversing the flat growth seen over the summer. The unemployment rate also saw a slight decline, down to 6.5%, marking its first drop this year. Full-time employment played a significant role, while part-time jobs took a dip. This job growth signals a healthier labor market, even as wage inflation is showing signs of slowing.

On the inflation front, there’s more good news. The Consumer Price Index (CPI) rose by 1.6% in September year-over-year—the slowest pace since February 2021—thanks largely to lower gasoline prices. While inflation is easing, prices remain significantly higher than a few years ago, especially for essentials like food and rent. This creates a mixed environment where Canadians feel the pinch, but policymakers are more optimistic about the path forward.

This economic backdrop places the Bank of Canada at a critical juncture. With inflation below the 2% target and the economy slowing, many experts, including Bruno Valko and Sherry Cooper, believe that larger rate cuts could be on the horizon. Traders have already increased their bets on a half-percentage-point reduction at the Bank’s upcoming meeting on October 23.

For mortgage holders and potential homebuyers, this could be a game-changer. The housing market is already showing signs of stabilizing after three rate cuts, with home sales gradually rising, especially in cities like Toronto, Montreal, and Vancouver. As more rate cuts are expected, mortgage rates may fall further, potentially bringing renewed activity into the housing market by spring 2025.

Stay tuned for the Bank of Canada’s announcement later this month—it could set the stage for the next phase of economic growth and real estate opportunities.

Thank you to Dr. Sherry Cooper and Bruno Valko for their insights!