Employment changed little in October, up only 17,500 (0.1%), after rising 64,000 in September and 40,000 in August. The employment rate—the proportion of the working-age population with a job—fell 0.1 percentage points to 61.9% in October, as the population aged 15 and older increased by 85,000 (+0.3%).

As unemployment has increased and job vacancies have decreased in recent months, the labour force participation rate—the proportion of the population aged 15 and older that was either employed or looking for work—has remained relatively high. The participation rate in October (65.6%) was unchanged from the previous month and up 0.2 percentage points on a year-over-year basis.

Wage inflation continues to be troubling for the central bank. On a year-over-year basis, average hourly wages rose 4.8% in October, following an increase of 5.0% in September.

The Bank of Canada meets once again on December 6th. Before then, we will see another CPI inflation report on November 21, Q3 GDP on November 30 and the November Labour Force Survey on December 1. Given the Bank’s general reluctance to hike rates just before the holiday season, the Bank of Canada will remain on the sidelines.

Judging by today’s weaker-than-expected employment report in the US as well, the Fed will also hold their pause for the remainder of this year.

Rate relief, however, is still many months away. The central banks will want to see inflation at 2% with the belief that it will remain there before they begin to cut interest rates. That will happen, but probably not before next summer. According to Bloomberg News, “Traders in overnight swaps brought forward their expectations for when the Bank of Canada will start loosening policy, and are now betting policymakers will cut interest rates by 25 basis points in July, from September a day ago.”

The national sales data were depressed in August by declines in Greater Vancouver and the Fraser Valley, Montreal, Ottawa, Hamilton-Burlington, London and St. Thomas.

The number of newly listed homes edged up 0.8% m/m in August, adding to the cumulative gain of more than 24% between March and July. New listings started 2023 at a 20-year low but are now closer to average levels. Recent survey data suggest pent-up supply is coming down the track as many homeowners reported they planned to their home in the next three years.

With sales falling and new listings edging up in August, the sales-to-new listings ratio eased to 56.2% compared to 59% in July and a peak of 67.4% in April. The measure is now closely aligned with its long-term average of 55.2%.

There were 3.4 months of inventory on a national basis at the end of August 2023, up from 3.2 months in July. While the measure is up a bit from its recent low of 3.1 months in May and June, it remains below the second half of 2022 and well below its long-term average of about five months.

The Aggregate Composite MLS® Home Price Index (HPI) edged up 0.4% on a month-over-month basis in August 2023— only about half as large as the July gain, which was only nearly half as large as the gains recorded in April, May, and June. This leveling off of prices aligns with slowing sales and a rebound in listings.

While prices are stabilizing at the national level, regional differences are re-emerging. Price growth has remained solid in Quebec and the East Coast, followed by British Columbia and the Prairies. Ontario is now a mixed bag, with some of the more significant increases and some of the bigger declines.

As of August 2023, the Aggregate Composite MLS® HPI was up 0.4% y/y. This was the first year-over-year increase since September 2022. Even though prices appear to be leveling out near current levels, year-over-year comparisons will likely continue to rise in the months ahead because of how prices continued to decline through the second half of 2022.

With the Bank of Canada moving to the sidelines and more supply gradually coming on board, housing activity will likely pick up in the coming months. Year-over-year home prices will rise owing to base effects, as lower prices were posted in the fall and winter of last year, making the y/y comparisons more favourable. We don’t want to see a burst of activity because that could cause the central bank to rethink its rate pause.

Housing affordability remains a significant problem for buyers, but recent data released for the second quarter shows an uptick in first-time purchases despite the affordability crunch.

The housing shortage and the resulting high cost of rent and buying are political issues at all levels of government. On Thursday, Prime Minister Trudeau pledged to cut the federal Goods and Services tax on constructing new apartment buildings as part of a promised host of measures to address affordability issues. Canadians are used to such actions by the feds, but the housing shortage will only worsen until municipalities address impediments to densification, building delays, and development costs.