Volatile consumer purchasing power is likely to make itself felt in the housing market, observers warn
The loss of hundreds of thousands of jobs in April has cast some doubt on Canada’s sustained recovery.
Latest data from Statistics Canada showed that the economy shed some 207,100 jobs last month, much higher than experts’ predicted figure of 150,000. This also significantly muted the impact of the more than 300,000 new workers added in March.
Together, these movements pushed up the unemployment rate from 7.5% in March to 8.1% in April. The number of full-time positions dropped by 129,400, while 77,800 part-time jobs were lost.
The decline was particularly severe among visible minorities, which accounted for 55,000 lost jobs. Metro Vancouver represented more than half of last month’s decline in this segment, which led to the unemployment rate in British Columbia ticking up to 7.1%.
Read more: BoC’s Macklem intent on drawing marginalized groups into the Canadian workforce
The resulting weaker purchasing power has serious implications for Canada’s current economic recovery, which at present is disproportionately relying on housing activity.
In a recent analysis, David Wolf of Fidelity Investments said that the residential market contributes almost 9% to national economic output, which is the highest share on record for this segment.
“Housing is becoming a dominant player in GDP in a way that is dangerous,” Wolf said, pointing to similar occurrences in Greece, Ireland, and Spain just before the Great Financial Crisis.
“These turned out to be epic housing bubbles that led to severe recessions.”
