As for the housing market, the unemployment rate helps to assess the outlook for all types of accommodations – not just homeownership. Rising mortgage rates tend to dominate discussions about the near future, but only 35 per cent of Canadians have a mortgage, according to the Bank of Canada. And of these, many have already paid down a large chunk of their principal, so their risk to the broader financial system is negligible.
Of course, the mortgage market can’t be completely discounted as a risk to the financial system. Mortgages comprise the largest block of assets on a bank’s balance sheet and housing crashes can easily seep into the broader economy, causing a recession. Loan losses typically begin accumulating when an asset bubble bursts.
Despite record-low unemployment, investors have been spooked of late and recession fears are weighing on stock prices. Banks are particularly vulnerable in this correction because of fears they will be hit with loan losses. The strength isn’t bank-specific. In its latest financial system review released in May, the Bank of Canada said the share of Canadians falling behind on consumer debt payments is around 2 per cent, which is close to the historical low.
What percentage are government jobs? Fake unemployment rate….
As we head into a recession (along with the rest of the Western world), don’t think unemployment won’t also rise too. The laws of economics still apply. Just like everything else economically, it won’t be different this time.
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