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Deal Fanatic
Nov 24, 2013
5084 posts
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Kingston, ON
KingKuba wrote:
Jan 7th, 2018 11:41 am
The stat for working age 25-54 in London here is 25% not working.
Unemployment keeps going down because there's less people looking for work.
Unemployment rate can decrease because of fewer people seeking work, however, in Canada, right now, the labour force is actually growing. It hit some stagnation in '15/'16 but has been increasing since as Ontario's boomed and Alberta's recovered,

http://www.statcan.gc.ca/daily-quotidie ... 01-eng.htm

Looking at all labour force characteristics for London specifically,

http://www5.statcan.gc.ca/cansim/a47

From 2016 to 2017, unemployment dropped from 6.1% to 5.6%. Pop increased by 6,000, labour force (defined as those 15 or older who are employed or looking for work) decreased by 3,000, consisting of an 800 decrease in employed persons and 2,200 decrease in unemployed seeking work. So you are right that London did see a decrease in unemployment and a decrease in those looking for work. Is this people 'giving up,' or people moving away for work, with retirees moving in? There's all kinds of contexts that are hard to tell from this raw data.

In Ontario overall though and Canada overall, the workforce is growing, empirically.
Deal Addict
Dec 27, 2006
1690 posts
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Canadian businesses face tight capacity as case for rate hike grows: BoC
January 8, 2018
David Parkinson
The Bank of Canada's closely watched quarterly survey of business sentiment shows that the country's businesses are under the tightest capacity pressures since before the Great Recession, perhaps giving the central bank's policy makers the last piece of evidence they need to raise interest rates again next week.

In the central bank's fourth-quarter Business Outlook Survey, released Monday, 56 per cent of participants said they would have "some" or "significant" difficulty meeting an unanticipated increase in demand, up from 47 per cent in the third-quarter survey, and the highest reading since the 2007 fourth quarter. Businesses also reported increasingly intense labour shortages that are restricting their ability to meet demand.

Companies reported that they are increasing hiring and capital investment to address these tight capacity conditions, in the face of what they say is still-growing demand, although they did say that they expect the pace of sales growth to moderate in the next 12 months.

The survey, involving senior managers of about 100 firms, was conducted from Nov. 14 to Dec. 8.

The report solidifies the case that has been building for the Bank of Canada to raise interest rates by another one-quarter of a percentage point, to 1.25 per cent from the current 1 per cent, when it issues its first rate decision of the new year on Jan. 17, after taking a pause on rate hikes following two increases last summer. The survey confirms recent indications from economic data that the economy is running full-out, with little or no spare capacity left to meet strong demand – a classic recipe for rate increases.

"The Bank of Canada's business outlook survey was the last key piece of the puzzle for a rate hike this month," said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, in a research note. "A majority now see either some or significant difficulty in meeting a demand increase, and indicate that the economy is near full capacity."

"Canadian businesses essentially just told the Bank of Canada to hike," said Bank of Nova Scotia economist Derek Holt.

In its December rate decision as well as in a speech from governor Stephen Poloz last month, the central bank said it would be "cautious" in raising rates, and that its decision on further hikes would be "guided by incoming data." Those data have recently been flashing the green light for the central bank to go ahead with further rate hikes, as they point to fast-tightening capacity and growing inflationary pressures.

Expectations for a rate hike surged last week after Statistics Canada reported that the economy turned in another gangbuster month for employment in December, adding 79,000 net new jobs and lowering the unemployment rate to 5.7 per cent, the lowest since the statistical agency began collecting comparable data in 1976. That suggested that slack in the labour market – something the Bank of Canada has repeatedly expressed concern about, even as measures of spare production capacity have shrivelled to nothing – is quickly tightening. Recent economic indicators have also shown a significant pickup in inflation to slightly above the central bank's 2 per cent target, and an encouraging recovery in export growth.

The Business Outlook Survey confirms that view that any remaining slack in the economy is disappearing, both in terms of labour and capital.

"Pressures on firms' capacity are pervasive in British Columbia, but are also becoming more apparent in central Canada," the Bank of Canada's report said. "Survey results suggest that economic slack is now largely limited to the energy-producing regions."

And notably, businesses don't seem to be letting concerns over the NAFTA trade negotiations darken their optimism – something the central bank has been watching for as it gauges how this key uncertainty might discourage investment and business expansion.

"While respondents are increasingly concerned about the renegotiation of the North American Free Trade Agreement and rising protectionism more generally, most see healthy U.S. growth and the low Canadian dollar benefiting their sales over the next 12 months," the report said. "Views on the U.S. economy have strengthened due to expectations of upcoming tax reforms and strong US consumer demand."

"On balance, firms expect an acceleration in export growth," the central bank said.

"Firms remain generally upbeat on the outlook, despite concerns surrounding NAFTA and minimum wage hikes," said Bank of Montreal chief economist Douglas Porter in a research report. "The Bank of Canada will take this as a loud hawkish signal."

Financial-market indicators also signalled that the results of the survey have all but cemented a hike at next week's rate decision. At midday, the bond market was pricing in an 86-per-cent likelihood of a quarter-point hike, up from 81 per cent an hour before the survey was released. Before last week's employment report, the market was pricing in only about a 40-per-cent chance of a hike.

https://www.theglobeandmail.com/report- ... e37523186/
Deal Addict
Oct 6, 2015
1301 posts
683 upvotes
Canadian businesses face tight capacity
Tight capacity? Yet wage increases were barely above inflation for people under 55 years of age last year, and actually beneath inflation for the 15-24 year old groups? Does.....not.....compute. (source: http://www.statcan.gc.ca/tables-tableau ... 9a-eng.htm). Workers in the natural and applied sciences, those who contribute heavily to capacity growth and productivity, actually lagged quite severely, as did those in manufacturing.

The whole idea of capacity constraints is nonsensical. Increasing rates now would be an unnatural gift to cash savers, but isn't supported by the markets, isn't supported by inflation numbers.

The problem with "Business Outlook Surveys" is that they tend to be dominated by responses from small businesses (due to their sheer numeracy), and a large number of small business owners have become so accustomed to not having to compete for labour that they think its perfectly natural that they have no shortage of people lining up for minimum wage jobs. The Tim Hortons debacle due to the minimum wage hikes is just one example of the mindset that has set in.
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Oct 6, 2015
1301 posts
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asa1973 wrote:
Jan 8th, 2018 10:13 am
Interesting view from the south (Feds) how tax boom and record unemployment will (not) affect the rate policy where inflation is a primary factor in decision.
For those who think decreasing unemployment automatically leads to higher inflation, here is a news - it's not anymore (besides the fact that most FT jobs in last year created in governmental sector afaik).
US had very low unemployment already but that didn't push the inflation so far and there's concern that lowering it more could fail either.
Now they price only two rate hikes, and even "hawkish" members saying tax cut could be a short time stimulus and they will not hike rate just because of jobs creation and tax cut.
http://mobile.reuters.com/article/amp/idUSKBN1EX012
More people working should theoretically lead to more economic output, which is deflationary. Raising interest rates in the late 1990s/early 2000s proved to be a monumental policy mistake as they had to be cut to zero in the wake of the tech bubble crash that followed -- very similar to the circumstances that exist today. Given the slow-motion crash in Canadian RE prices underway, and the likelihood of such bleeding into the rest of the economy, Poloz will perhaps take a longer-term view of rates.

Curiously the money markets appear to be projecting rate *cuts* going forward, not rate hikes. For the past few weeks, money has been available on a wholesale basis for 0.8% (source, which is actually beneath the BoC's policy target of 1%. If a rate hike were legitimately planned, usually the wholesale markets project this a few weeks out, trading above the target range.
Member
Aug 3, 2006
475 posts
259 upvotes
Motoss wrote:
Jan 8th, 2018 4:25 pm

At midday, the bond market was pricing in an 86-per-cent likelihood of a quarter-point hike, up from 81 per cent an hour before the survey was released. Before last week's employment report, the market was pricing in only about a 40-per-cent chance of a hike.
Looks like its a done deal.
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Apr 21, 2004
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So the BoC follows what the market says? Haven't read the article on front page but it seems Poloz has provided some indication he will raise rates next week?

BoC mentioned predicting a 60k job cuts as a result of the minimum wage hike in Ontario.

Surely they will at least look at the next one or two employment figures?
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Dec 7, 2012
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alanbrenton wrote:
Jan 8th, 2018 7:00 pm
So the BoC follows what the market says? Haven't read the article on front page but it seems Poloz has provided some indication he will raise rates next week?

BoC mentioned predicting a 60k job cuts as a result of the minimum wage hike in Ontario.

Surely they will at least look at the next one or two employment figures?
Why are you spreading wrong information?

Media get it wrong on Bank of Canada minimum wage study
http://behindthenumbers.ca/2018/01/05/m ... imum-wage/

A major claim of the Bank’s note is that, for workers, the benefits of increasing the minimum wage outweigh the costs in terms of labour income. First of all, the Bank is not predicting 60,000 pink slips, but merely a slowdown in continued job growth. The 60,000 figure is a national, annual one and represents just 0.3% of total employment. Monthly job growth has at times exceeded this number.

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Nov 27, 2007
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I am all for rate hike, more like curious to know what percentage of mortgages are wih fake paperwork
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Apr 21, 2004
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tk1000 wrote:
Jan 8th, 2018 8:01 pm
Why are you spreading wrong information?

Media get it wrong on Bank of Canada minimum wage study
http://behindthenumbers.ca/2018/01/05/m ... imum-wage/

A major claim of the Bank’s note is that, for workers, the benefits of increasing the minimum wage outweigh the costs in terms of labour income. First of all, the Bank is not predicting 60,000 pink slips, but merely a slowdown in continued job growth. The 60,000 figure is a national, annual one and represents just 0.3% of total employment. Monthly job growth has at times exceeded this number.

You mean media? I said I didn't read the front page article yet so I can only go by the headline.

60k of foregone jobs is 60k of lost future jobs if you think of them as lost opportunities. Maybe the 60k lost future jobs are lagging but it still means those jobs are forever gone.

That's like saying companies are disincentived to hire because of cost pressures so let's increase interest rates to help the situation.
Deal Addict
Jun 27, 2005
1051 posts
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Oakville, ON
Anyone what a rate hike typically means for the banks discount to the variable rates? For example, if banks offer P-0.7 now, after the rate hike do they usually keep it P-0.7 or potentially increase to P-0.75 to P-0.95?
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Oct 6, 2015
1301 posts
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2heaven wrote:
Jan 8th, 2018 11:44 pm
Anyone what a rate hike typically means for the banks discount to the variable rates? For example, if banks offer P-0.7 now, after the rate hike do they usually keep it P-0.7 or potentially increase to P-0.75 to P-0.95?
The discounts have been lessening on RE-backed loans and lines of credit due to the increasing perception of poorer credit-worthiness.

If RE is correlated to interest rates as many suspect it is, RE prices would go down with higher rates. Falling RE prices would decrease credit-worthiness for a large chunk of borrowers (due to increasing debt service costs and declining equity), which, in turn, would drive spread expansion. Hence, discounts would disappear.

Discounting against "Prime" for consumer credit (such as residential mortgages) is a relatively recent phenomena. Traditionally "Prime" referred to "Business Prime", the sort of rate that a highly creditworthy business could best achieve, not a rate available to consumers backed by residential real estate.

After all, business borrow to create jobs and to invest in things. Mortgage borrowing is mostly just for consumption.
Newbie
Jan 11, 2011
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I got my mortgage in the summer just before the first hike (closed after the first hike) and it was P-0.7 and was the best available (insured mortgage). Today the best is around P-1.19 for insured mortgages (source: ratespy.com). This is probably pure correlation and not causation...
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Dec 7, 2012
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Bank of Canada could raise interest rate next week

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Oct 7, 2007
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craftsman wrote:
Jan 7th, 2018 5:05 pm
To a certain extent, jobs aren't too important in a market like this especially when the public is overran by FOMO mentality. After all, according to all of the bank studies on affordability in Vancouver, all of them say that no-one should be able to afford to live here but yet the market goes up. When you separate basic economic and money theory from the housing market, who needs jobs?
This is probably correct. Also, people seem to want to do AirBnB and UBER instead of working so I guess jobs are no longer the way to go when there are more lazy ways to turn a dime.

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