So how will Canada fare with employment, oil prices and housing in 2015? Top economists share their views for the year ahead.
Doug Porter, chief economist at BMO Capital Markets believes that 2015 will see only a little improvement in the job market. “Through much of 2013 and 2014 the jobless rate was seemingly locked at about seven per cent. It’s become unstuck in recent months. We see it in the low six per cent range,” says Porter. According to Porter, the rate of unemployment drifts downwards in a growing economy, whereas it shoots up drastically when economic growth slows down. And as BMO Capital Markets foresee the Canadian economy doing better in the coming year, it is therefore predicted to bring down the unemployment rates as well.
The chief economist at Gluskin Sheff and Associates, David Rosenberg, also has a positive prediction for 2015, forecasting the unemployment rate to drop from 6.5% to 6% by the end of next year mainly due to Canadian exports seeing a boost due to a slowdown in China’s economy. “With the lagged impact of the Canadian dollar’s depreciation, the fiscal stimulus at the federal level and the US economy in acceleration mode, goods-producing employment will be a big source of support,” says Rosenberg,
Dawn Desjardins, assistant chief economist at Royal Bank of Canada, believes the unemployment rate in 2015 will lower only slightly from its current 6.5%. “We expect it will hold at or slightly below this level, historically considered to be the economy’s full employment rate.” says Desjardins.
Striking a positive note, Porter believes the US will lead the way to a global economic recovery in 2015, and that this won’t be hampered by high oil prices, which he believes will see only a moderate increase. “I don’t think we will be back at the triple-digit mark, but it will be in the low to mid-$80s. So we will see some recovery—though, having said that, it could go lower in the meantime.” Rosenberg largely shares this view, putting the price rise down to higher international demand and production cuts from both OPEC and non-OPEC suppliers all over the world. “There is a significant portion of global oil production that is not economic or “fiscally viable” below $80 per barrel and this will result in production cutbacks after oil remains below $80 for a couple of quarters,” says Rosenberg.
Desjardins also predicts only a mild increase in oil price in 2015. “We expect oil prices (WTI) will be around $75 at the end of 2015, supported by a gradual recovery in global demand and the likely paring back of supply,” says she.
On the question of housing prices, Porter feels that it is tough to speculate on Canada’s real estate market, but believes that prices will increase in 2015. “They won’t rise as quickly as in 2014; we’ll see a bit of cooling off next year. But economists, pundits and media have been spectacularly wrong on the housing market. As long as borrowing costs remain so exceptionally low, and employment growth keeps churning ahead, it would be tough to see a serious near-term correction. That’s not to say the market will never feel some pain, but the near-term outlook appears reasonable at this point,” he says.
Desjardins also predicts higher house prices by the end of 2015, but thinks that the rate of increase will be lowest since 2009. “Affordability in most markets shows modest signs of stress. The outliers are Toronto, Vancouver and to a lesser extent Calgary. Low interest rates and modest increases in income have offset the impact of rising prices in most cities. In 2015, expected increases in mortgage rates will challenge affordability. That said, with the Bank of Canada likely to only slowly raise the policy rate, and income growth expected to accelerate, we are looking for a cooling in housing sales, not a collapse,” she elaborates.
Rosenberg however feels that house prices will remain flat all over Canada. He predicts low mortgage rates for next year due to the good amount of housing availability in terms of supply and demand. “But home prices relative to apartments are too far into the stratosphere, and residential real estate values, benchmarked against virtually any economic metric, are far too high relative to historical norms to believe there can be much upside to prices,” says Rosenberg.