15 Jun

US EMPLOYMENT STRONG IN JANUARY, BUT WAGES LAG

General

Posted by: Krishna Menon

US Employment Strong In January, But Wages Lag

ob growth in the US in January was better than expected, rising 227,000–up from 157,000 in December–according to the Labor Department report on Friday in Washington. While payrolls have been strong, however, wage increases remain disappointingly muted. The unemployment rate rose a tick to 4.8 percent, and average hourly earnings grew 2.5 percent year-over-year, the weakest since August following a 2.8 percent gain the prior month.

At this stage in the US economic cycle, we would normally expected that wage pressures would be mounting and employment growth would slow. Federal Reserve policy makers, who left interest rates unchanged on Wednesday, suggested that there was still room for improvement in the jobs market, as they expect to gradually tighten monetary policy this year.

President Trump has pledged to bring people back into the labor force. The participation rate, which shows the share of working-age people in the labor force, increased to a four-month high of 62.9 percent in January. However, it is still low by historical standards as there were 5.84 million Americans in January who were working part-time though they would have preferred a full-time job. The President has promised to boost wages further through tax cuts, infrastructure spending and deregulation. As well, he plans to boost employment by “bringing jobs back” from lower-cost countries through import tariffs and pressure on American companies that produce outside the U.S.

During the election campaign, President Trump called the unemployment rate “phony” and argued that it overstated the strength in the US labor market. A broader measure of unemployment–which includes those people who are involuntarily working less than full-time as well as discouraged workers who have given up looking for a job–rose to 9.4 percent in January from 9.2 percent the prior month. Clearly, there are many people who had formerly been working in manufacturing jobs that have since moved to low-wage countries. Hence, Mr. Trump’s war on Mexico and China.

However, one crucial missing point here is that many of these (and other jobs) have been rendered obsolete by technological advances. Robots are doing the jobs of thousands of people and advances in artificial intelligence will only accelerate this process, which is impervious to trade restrictions.

Potential Trade War

President Trump has vowed to rip-up NAFTA, but his focus is really on Mexico. Nevertheless, Canada remains vulnerable to potential plans to introduce a 20 percent US border tax. Such a measure would be a radical shift away from free trade and could well trigger retaliatory tariffs, reducing trade and economic activity worldwide. The magnitude of the damage would be enormous and counter-productive, as it would push the US dollar up significantly.

Peter Navarro, the head of Trump’s National Trade Council, has recently suggested that Germany’s “excessive” trade surplus is evidence of a “grossly undervalued” euro. He  has now indicted Germany for alleged theft of American jobs. Chancellor Angela Merkel rejected this charge, telling reporters Tuesday that the euro’s exchange rate was the province of the European Central Bank and the German Government had long upheld the ECB’s independence. On the same day, President Trump accused Japan  and re-accused China of currency manipulation saying they “play the money market, they play the devaluation market and we sit there like a bunch of dummies.”

This protectionist sentiment in the new administration is extremely dangerous, not only to the global economy, but to geopolitical stability and Canada could well get caught in the cross fire. The fact is that no country has the power to sustain a unilateral devaluation of its currency. Even when central banks have acted in concert to drive a currency’s movement, it has been unsuccessful for more than a short period of time as market forces overwhelm central bank activity. All of this kind of rhetoric merely drives the US dollar upward, further devaluing the currencies of the US’s trading partners. In other words, it is self defeating. Nonetheless, tariffs and other protectionist measure run the risk of disrupting global trade flows and hence economic activity.

The Smoot-Hawley Tariff of 1930 helped to drive the US and the global economy into the Great Depression. It has long been held up as a cautionary tale about how a protectionist measure by the US can bring the global economy to its knees and intensify nationalism all over the world. The Republican Congress must prevent the Trump administration from getting the import tariff it is currently proposing.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

14 Jun

An Ultimate Guide to Mortgage Insurance In Canada

Mortgage Tips

Posted by: Krishna Menon

When you purchase a home in Canada, it’s one of the biggest decisions and investments you’ll probably ever make. Therefore, you’ll want to ensure that your large investment and your family is protected financially in the future, since life comes with many uncertainties.
In Canada, there are three different mortgage insurance providers:

● CMHC
● Genworth Financial Canada
● Canada Guaranty

You can ask your mortgage broker with insurance provider they’d recommend for you, have them provide more information on various the insurances offered by these companies, and find out how each one works.

Mortgage Protection Insurance (Life & Disability)
A large majority of Canadians are uninsured. Nearly 45 percent to be exact! This number includes both mortgage and life insurances. Although many people worry about their families when they consider what might happen when they die, they still remain uninsured. Pre-deceased family members may be left struggling, making mortgage payments on their own when the uninsured spouse dies.

Mortgage Protection Insurance can prevent this from becoming a reality, as it would pay off the remaining balance of your mortgage in the event either spouse’s death. At My Milton Mortgage, one of Dominion Lending Centres Top Producers, we offer mortgage protection insurance with great features. The insurance we offer is much better than traditional bank mortgage insurance. Our protection insurance includes:
● Portability, which means no loss of coverage or re-qualification at renewal time
● Premiums that don’t increase due to health concerns or age
● Both life insurance and total disability insurance protections
● Protections in the event of a death, serious accident or illness

Mortgage Loan Insurance
Mortgage loan insurance is not the same as mortgage life insurance. Since lenders require mortgage loan insurance when you make a down payment of less than 20 percent for your home purchase, it’s a way to protect lenders in case of mortgage default. This insurance allows home-buyers to buy homes with as little as 5 percent down, and similar interest rates to those who make a 20 percent down payment.

You lender will pay an insurance premium so that you can obtain mortgage insurance and they will pass this cost onto you. Payable premiums can vary depending on the purchase price of your home, this is a certain percentage. You can either make on lump sum payment for the premium, or you can be added to your mortgage. It will then be included in your monthly payments each month.

To apply for or learn more about Mortgage Protection Insurance contact a professional mortgage broker, who can walk you through the ins-and-outs of your mortgage life insurance, the costs and get the instant coverage you need.

To learn more about mortgage products, insurance or any other financial matters, contact us today.