Canadian Job Growth Stalls in February

General Kimberly Coutts 7 Mar

Weak Canadian Job Creation Opens The Way For BoC Easing Next Week

Today’s Labour Force Survey for February was weaker than expected, showing de minimis job growth last month. Employment held steady in February (+1,100; +0.0%), following three consecutive monthly increases totalling 211,000 (+1.0%) in November, December and January. On a year-over-year basis, employment was up by 387,000 (+1.9%) in February.

The employment rate—the proportion of the population aged 15 and older who are employed—was unchanged at 61.1% in February. This follows three consecutive months of increases. The employment rate had previously fallen 1.7 percentage points from April 2023 to October 2024, as employment growth was outpaced by population growth. 

The number of private sector employees was little changed in February, following increases in December (+39,000; +0.3%) and January (+57,000; +0.4%). Public sector employment and self-employment were also little changed in February.

Total actual hours worked fell 1.3% in February—the most significant monthly decline since April 2022. On a year-over-year basis, total hours worked were up 0.5% in February 2025.

Notable winter storms buried parts of Central and Eastern Canada in snow throughout the LFS reference week of February 9 to February 15. 429,000 employees lost work hours due to the weather for part of the week (not seasonally adjusted). This was more than four times higher than the average number of employees who lost work hours due to weather in February over the previous five years (96,000).

The unemployment rate was unchanged at 6.6% in February, following decreases in December (-0.2 percentage points) and January (-0.1 percentage points). The unemployment rate had previously trended up, rising from 5.0% in March 2023 to reach a recent high of 6.9% in November 2024.

In February, the unemployment rate for core-aged women declined 0.2 percentage points to 5.4%. For core-aged men, the rate rose 0.3 percentage points to 5.9%, driven by an increase in job seekers.

Among youth, the unemployment rate fell 0.7 percentage points to 12.9% in February, following a similar-sized decline in January (-0.6 percentage points). Over these two months, the number of young unemployed job searchers fell by 41,000 (-9.3%), while youth employment rose by 22,000 (+0.8%). The youth unemployment rate had previously touched a 12-year high (excluding 2020 and 2021, during the COVID-19 pandemic) of 14.2% in August and December 2024, following a strong upward trend throughout most of 2023 and 2024.

In February, wholesale and retail trade employment increased (+51,000; +1.7%). Employment in this industry has increased in recent months, rising 107,000 (+3.7%) from a recent low point in July 2024 and offsetting declines in the first half of 2024. Compared with 12 months earlier, the number of people working in the industry changed little.

More people worked in finance, insurance, real estate, rental and leasing (+16,000; +1.1%) in February, the second increase in three months. On a year-over-year basis, employment in the industry was up by 60,000 (+4.3%).

Employment gains led by wholesale and retail trade offset by declines in other industries

In contrast, employment fell in February in professional, scientific and technical services (-33,000; -1.6%). Employment growth in this industry has been subdued in recent months, following a strong upward trend from July 2023 to November 2024.

Employment also fell in transportation and warehousing (-23,000; -2.1%) in February, following gains of 17,000 in December and 13,000 in January. On a year-over-year basis, employment in the industry was down by 29,000 (-2.6%).

Total hours worked fell 1.3% in the month, but were up 0.5% compared with 12 months earlier.

Average hourly wages among employees were up 3.8% (+$1.32 to $36.14) on a year-over-year basis in February, following growth of 3.5% in January (not seasonally adjusted).

Bottom Line

With a combination of emerging weakness and US President Donald Trump’s on-again, off-again tariff approach still casting a cloud of uncertainty over the Canadian economy and its ability to trade with its biggest customer, the Bank of Canada is expected to cut its policy rate for the seventh straight meeting on March 12.

The loonie briefly dipped to the day’s low against the US dollar and traded at $1.4337 as of 8:35 a.m. in Ottawa after the concurrent release of similarly soft US jobs figures. Canada’s two-year yield slipped around three basis points to 2.60%, tracking a broader move lower in developed market yields.

Today’s reports for Canada and the UF are the latest evidence that North American labour markets are softening, with more people permanently out of work, fewer workers on federal government payrolls and a jump in those working part-time for economic reasons. The number of Americans holding multiple jobs climbed to nearly 8.9 million.

That sets a weak backdrop just as President Donald Trump’s policies raise concerns about the broader economy. Inflation has proven sticky in the US in recent months and consumers are starting to pull back on spending, which, if sustained, may lead businesses to rethink their hiring plans.
Following the releases, overnight swaps traders increased their bets that the Bank of Canada would trim borrowing costs by another 25 basis points next week, boosting the odds to 85% from about three-quarters previously.

This is the first jobs report that fully reflects Trump’s second term, and the administration’s actions to shrink the government workforce have already contributed to the most job-cut announcements since early in the pandemic, according to separate data out Thursday. Some economists say the US could lose over half a million jobs by the end of the year because of the federal job cuts and their spillover effects to the broader economy.

Trump is also deploying tariffs to bring manufacturing jobs back to the US, and that’s already incentivizing some companies like Apple and HP to consider investing more domestically. Conversely, aluminum producer Alcoa Corp. has warned that the levies could result in 100,000 job losses.

Canada and the US are restricting immigration or sending migrants home, which will constrain a significant source of job growth in recent years.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

 

Trump did it–the trade war started at midnight. Stocks and currencies are falling, but so are interest rates.

General Kimberly Coutts 4 Mar

Trump Did It–Trade War Starts Today

Trump has imposed tariffs of 25% on goods coming from Mexico and Canada, 10% on Canadian energy, and an additional  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 Wall Street Journal, typically considered a conservative publication, criticized Trump, labelling this as the “dumbest trade war in history.” The Journal stated, “Mr. Trump sometimes sounds as if the US 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.”

This misguided tariff policy will cause untold damage to the global economy, including the US. Americans will suffer the impact of higher prices and shortages of key products imported from Canada and Mexico. The various North American free trade agreements aimed to improve manufacturing efficiencies and meld the three economies to maximize productivity and the free flow of essential inputs into production. Canada is the number one supplier of steel and aluminum and there are no readily available substitutes for these crucial inputs. A plethora of products and construction activity use steel and aluminum. Aluminum is produced in Quebec where hydroelectricity is plentiful and cheap. US farmers depend on Canadian potash and auto parts, and Canada is the number one exporter of oil and gas to the US.

Consider the US 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 US 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 US Trade Representative, the industry contributed more than $809 billion to the US economy in 2023, representing about 11.2% of total US manufacturing output and supporting 9.7 million direct and indirect US jobs. In 2022, the US exported $75.4 billion in vehicles and parts to Canada and Mexico. According to the American Automotive Policy Council, this figure rose 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 leverages high-skilled and low-cost labour markets to source components, software, and assembly.

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

Yesterday, the President’s tariff announcement led to an immediate sell-off in stock markets worldwide. Bonds, seen as a safer haven, rallied sharply, taking longer-term interest rates down sharply in anticipation of a meaningful slowdown in economic activity. The Canadian dollar sold off sharply, though it clawed back some of its losses overnight. WTI oil prices dropped 2% yesterday and continued to decline today.

Bottom Line

This is a lose-lose situation and President Trump underestimates the negative fallout of his actions at home and abroad. Retaliation will be swift. Americans will balk at the disruption of supply chains (think waiting for months for a new car) and the increase in the price of many products.

Legendary investor, Warren Buffet, called the tariffs an “act of war.”

Before the tariffs were imposed, we expected roughly 2% growth this year. Assuming the tariffs remain in place for a year, the Canadian economy will plunge into recession. We will likely see a few quarters of negative growth before growth gradually resumes.

Despite the inflation risk, the Bank of Canada will respond aggressively to minimize the meltdown in labour markets and the economy in general. When the Governing Council meets again on March 12, we expect another 25 bps cut in the overnight policy rate, bringing it down to 2.75%. Over the next year, we expect the Bank to continue to ease credit conditions, and a 2.0% overnight rate is likely.

The Canadian 5-year yield, a bellwether for setting fixed mortgage rates, has fallen to 2.51%, its lowest level in nearly three years. Lower interest rates are favorable for housing markets, although the inevitable rise in unemployment and drop in spending will mitigate this effect.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

 

Spring Forward: Preparing Your Finances for the Home-Buying Season

General Kimberly Coutts 3 Mar

Spring is one of the busiest seasons in the real estate market, with buyers eager to find their dream home before summer.

If you’re planning to purchase a home in Spring 2025, now is the time to get your finances in order.

Being financially prepared can help you secure a mortgage with favorable terms and make your home-buying journey smoother. Here’s how to get ready:

1. Check and Strengthen Your Credit Score

Your credit score is one of the most important factors in mortgage approval, influencing both your eligibility and the interest rate you’ll receive. A higher score can save you thousands over the life of your mortgage, so it’s worth taking the time to improve it.

  • Start by checking your credit report for errors, and if you spot any inaccuracies, dispute them immediately.
  • Pay down outstanding debts to lower your credit utilization ratio, which plays a big role in your score.
  • Avoid opening new lines of credit in the months leading up to your mortgage application, as this can temporarily lower your score.
  • By reaching out to me, I can help preserve your credit score as they will pull your credit report once to shop your application. Note: Multiple credit checks in a short period can lower your credit score.

2. Build a Strong Down Payment

The more you can put down up front, the better. A larger down payment can reduce your monthly mortgage costs, give you access to better loan terms, and, in some cases, eliminate the need for mortgage insurance.

  • Set a savings goal based on home prices in your target area so you have a clear plan.
  • Explore first-time homebuyer programs that offer down payment assistance—there are plenty of government and lender-based options.
  • Make saving a habit by automating deposits into a dedicated home savings account.
  • Avoid moving your money around to multiple accounts prior to applying for your mortgage. Lenders require a 90-day history of your down payment and a history of moving your money around can make this more difficult to easily verify your down payment.

3. Reduce Your Debt-to-Income Ratio (DTI)

Lenders use your debt-to-income ratio (DTI), aka GDS/TDS, to assess how comfortably you can handle a mortgage payment on top of your existing obligations. A lower DTI signals financial stability, improves your chances of loan approval and can expand your borrowing power.

  • Work on paying off high-interest debts or debts with high monthly payments, like credit cards and personal loans, to free up more of your income.
  • Hold off on making large purchases or taking on new loans, such as car financing, before applying for a mortgage.
  • If possible, look for ways to increase your income—whether through a raise, side gig, or freelance work—to strengthen your financial standing. Note self employed income or part time non guaranteed hours employment generally require a 2-year history.

4. Get Pre-Approved for a Mortgage

A mortgage pre-approval is a game-changer in a competitive market. It gives you a clear budget, shows sellers that you’re a serious buyer, and can even speed up the closing process.

  • Start gathering essential documents like tax returns, pay stubs, and bank statements—lenders and myself will need these to assess your financial health.
  • Reach out to me today for information to help you compare mortgage rates and terms, ensuring you get the best deal.
  • Take time to discuss your mortgage options with me, from fixed to variable rates, different term lengths, or special programs available to you.
  • Download my mobile mortgage app.

5. Budget for Additional Costs

The home price isn’t the only expense you’ll need to plan for. Homeownership comes with extra costs that can catch buyers off guard if they’re not prepared.

  • Closing costs typically range from 1.5% to 4% of the home’s purchase price, covering legal fees, land transfer taxes, and more. This is money you need on top of your down payment
  • Property taxes, Condo fees and homeowners’ insurance can add to your monthly expenses—make sure to factor them into your budget.
  • Set aside a fund for home maintenance and emergency repairs to avoid financial strain when unexpected expenses arise.

6. Research the Housing Market

Spring is a competitive time to buy, so being well-informed about the market can give you an edge.

  • Keep an eye on housing prices in your preferred neighborhoods to understand trends and pricing expectations.
  • Stay updated on current interest rates, as they directly impact affordability and your monthly payments.
  • Work with a trusted real estate agent who can help you navigate bidding wars, negotiate offers, and find the right home for your needs.

7. Consider Locking in an Interest Rate

Interest rates can fluctuate, and even a small increase can affect your monthly payments. If rates are expected to rise, securing a lower rate in advance could save you money over time.

  • Ask me about rate lock options and how long they’re valid for. Rate holds on average are valid for 120 days before they expire and a new rate hold period is requested
  • Compare fixed and variable rates to see which aligns best with your financial goals.
  • Keep an eye on Bank of Canada rate announcements and economic trends that could impact mortgage rates. Note: With recent Bank of Canada announcements variable rates which are tied to Prime are dropping.

Taking these steps now will set you up for success. The more financially prepared you are, the smoother the process will be—and the better your chances of landing your dream home at the right price.