‘No es­cap­ing it’ — in­ter­est rates go­ing up

Hamil­ton’s low un­em­ploy­ment part of pos­i­tive na­tional growth

The Hamilton Spectator - - CANADA & WORLD - NATALIE PADDON

Cana­dian in­ter­est rates are ex­pected to con­tinue creep­ing up through­out 2018 yet still re­main “very low” at the end of the year, ac­cord­ing to a Royal Bank of Canada se­nior econ­o­mist.

Gone are the days of the “ul­tra low” in­ter­est rates, Robert Hogue told the Burling­ton Cham­ber of Com­merce Thurs­day morn­ing dur­ing an eco­nomic fore­cast.

“There’s no es­cap­ing it — the in­ter­est rates are go­ing to move up,” be­cause of the econ­omy’s growth, which had been run­ning at about 4 per cent for the first half of 2017, he said.

The Cana­dian econ­omy was “on fire” in the sec­ond half of 2016 and first six months of this year, and On­tario has been a “big part” of that, Hogue noted.

“The Bank of Canada is run­ning out of ex­cuses to keep in­ter­est rates very low,” ac­cord­ing to the econ­o­mist.

Dur­ing his talk, Hogue also touched on other top­ics and their lo­cal im­pact, in­clud­ing the hous­ing and labour mar­kets and min­i­mum wage.

JOBS

Hogue pointed to Hamil­ton’s un­em­ploy­ment rate of 4.2 per cent, not­ing it as the third low­est in the coun­try when it comes to ma­jor cities.

Provincewide, Hogue said he ex­pects the labour mar­ket to re­main be­low 6 per cent over the next year.

Canada’s labour mar­ket has re­turned to where it was prior to the 2008 re­ces­sion, said Hogue, not­ing the “vast ma­jor­ity” of added jobs are full-time po­si­tions.

HOUS­ING

Con­cerns about a “way too strong” hous­ing mar­ket in the spring were curbed by the provin­cial gov­ern­ment’s Fair Hous­ing Plan, Hogue said.

Prices, in­clud­ing in Hamil­ton and Burling­ton, are still ad­just­ing af­ter an “over­cor­rec­tion” be­tween April and July, he said.

“At the end of the day, it made the mar­ket more calm,” Hogue said.

While the 2017 calm­ing was driven by a policy de­ci­sion, Hogue ex­pects the hous­ing mar­ket will con­tinue to slow down be­cause of higher in­ter­est rates.

The hous­ing mar­ket is a “prime can­di­date” to be af­fected by ris­ing in­ter­est rates, es­pe­cially given the high debt-to-in­come ra­tio in Canada, he said.

A one per cent in­crease in mort­gage rates rep­re­sents two times the im­pact on house­hold bud­gets com­pared to 15 years ago, Hogue added.

WAGE

In­creas­ing min­i­mum wage to $15 an hour will be a “huge thing” for many busi­nesses, Hogue said.

But the net im­pact of the boost on the labour mar­ket is not clear, he said.

While work­ers will be mak­ing more money, which could in­crease con­sumer spend­ing, em­ploy­ers may have to cut hours or jobs, which could cause an in­crease in the un­em­ploy­ment rate, he added.

“The jury is still out whether this is go­ing to be a pos­i­tive thing or not,” he said.

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