The Week in Review

Weekly Market Recap: U.S. and Canada

After suffering a bit of a setback last week, the major U.S. indices rebounded this week with the Nasdaq up an impressive 2.5%, followed by the S&P 500 up 1.3%, and the Dow Jones eking its way into positive territory. Here at home, the TSX ended a volatile week down just over 1%.

S&P 500 Week At-a-Glance

TSX Week At-a-Glance

COMMENTARY

There was a ton of economic news out this week. Let’s go through a quick overview of the major stories.

🏦 Bank of Canada Interest Rate Cut

First off, as was pretty much expected, the Bank of Canada made its first rate cut in around four years, lowering its key interest rate by 25 basis points to 4.75%.

The Bank also said it’s not opposed to more cuts in the coming months, as long as inflation numbers keep moving in the right direction. With inflation moving closer to the 2% target rate, the bank feels more comfortable shifting to a less restrictive monetary policy stance.

The Bank did make mention of softer-than-expected GDP growth and tightening labor market conditions as potential risks.

📈 Canadian Unemployment Rate

Stats Canada released jobs info Friday and we saw Canada's unemployment rate climb to 6.2% in May 2024, hitting the highest level since October 2021.

Despite the overall rise in unemployment, net employment rose by 26,700, beating the consensus expectations of 22,500. This is down from an increase of 90,400 in April.

Part-time employment was up by 62,000 while full-time unemployment declined by 36,000.

🏭 ISM Manufacturing PMI

A metric I watch closely is the ISM Manufacturing PMI. The latest report was not good.

The ISM Manufacturing PMI unexpectedly dipped to 48.7 in May 2024, signaling another contraction in manufacturing activity. Forecasts were for 49.6.

Some of the low-lights of this month’s PMI report:

• Soft demand led to declines in new orders, inventories, and backlog of orders, while production also slowed.

• Although employment rebounded, challenges persist in new orders and production, indicating ongoing sectoral difficulties.

• Slower price increases, particularly in commodity-driven costs, contributed to a slower pace of inflation.

🦅US Jobs Data Double-Header

We were treated to a jobs double-header on Friday, as the The US Bureau of Labor Statistics released the latest numbers for both Non-Farm Payrolls and the Unemployment Rate.

The U.S. economy added a very strong 272,000 jobs in May, beating expectations of 185,000.

Strong job growth came from sectors such as healthcare, government, leisure and hospitality, and professional services. However, sectors like mining, construction, and manufacturing showed minimal or no change in employment.

On the unemployment front, the US unemployment rate rose to 4% in May, reaching the highest level since January 2022 and coming in worse than market expectations, which were anticipating the rate to remain unchanged.

All in all, it was a very busy week. This coming week, in another double-header, the Fed will announce its rate decision on Wednesday, the same day that U.S. Inflation numbers are released. Grab your Popcorn!

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

Most Overbought Stocks

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold. A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell. Always perform your own due diligence.

Most Oversold Stocks

A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

THE ECONOMY
Canada’s Job Struggles are Back

It seems like just the other day when businesses couldn’t find enough employees to keep the doors open. In the relatively small city I live in, we’d have to call restaurants in the morning to see whether they’d even be open on any given day.

Well, those days are fading.

📊 Unemployment Rises to 6.2%

The Canadian unemployment rate was up slightly to 6.2% in May, with only 27,000 jobs added. This modest gain couldn’t keep pace with the growing number of jobseekers.

⏳ Back to the Usual Slow Pace

April saw a surprising employment spike of 90,000 jobs, but May's numbers suggest the job market is back to its usual slow pace, with the numbers coming in at 26,700.

Interestingly, all job gains were in part-time positions, mainly in Ontario.

🚧 Jobseekers Face More Hurdles 

In April, only about a quarter of unemployed Canadians found work, a significant drop from pre-pandemic averages.

As the new data show, more Canadians are also working part-time because full-time jobs are scarce, with the involuntary part-time rate hitting 18.2%, up from 15.4% last year. This is the proportion of part-time workers who could not find a full-time job or who worked part-time due to poor business conditions.

Youth employment was notably hit, with returning students aged 20 to 24 seeing a 2.9% employment rate drop from last year. That rate now sits at 61.0%.

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HOUSING, Part 1
Record High Rental Prices in Canada

If you’re currently renting your home, you’re probably feeling the pain of persistent (and growing) rent prices.

The average asking rental price in Canada soared to a record in May, moving over the $2,200 level, according to a report by Rentals.ca and Urbanation.

🏙️ Highest Rents in Major Cities

• Vancouver: $2,671 for a one-bedroom

• Burnaby, B.C.: $2,545

• Toronto: $2,479

• Mississauga, Ont.: $2,339

If you live in a smaller cities, you might not even have noticed there’s an ongoing crisis. Here are a few prices from more reasonable communities:

• St. John's, N.L.: $955

• Fort McMurray, Alta.: $1,242

• Saskatoon, Sask.: $1,258

📉 Slight Declines in Big Cities

While Vancouver and Toronto saw slight decreases in rental prices since May 2023, smaller cities like Regina, Quebec City, and Halifax experienced annual increases of 10% or more.

🏡 Provincial Averages

• B.C.: Highest average at $2,526, a 2.3% increase

• Ontario: $2,423, a 0.7% increase

🚀 Largest Annual Increases

• Saskatchewan: 21.4% increase to $1,334

• Alberta: 17.5% increase to $1,787

• Nova Scotia: 17.1% increase to $2,238

📊 City Highlights

• Edmonton: Led larger cities in price increase at 14.6%, but still cheaper than Calgary at $1,507 versus $2,089.

• Overall Highs: Vancouver ($3,008) and Toronto ($2,784) for all apartment and condo sizes.

If you’re being hit by higher rent prices, make sure you read the next story to ensure your landlord doesn’t take advantage of you.

HOUSING, Part 2
BC Landlords are Getting More Aggressive, Hurting Tenants

😱 Imagine being told your rent will jump by 40%, or you’ll face eviction.

That’s what some BC residents have been facing, as landlords are becoming more aggressive in attempts to evict long-term residents and replacing them with new occupants who’ll pay higher rent.

As an example, Linda de Gonzalez, a retired bookkeeper in Surrey, B.C., faced this scenario last spring. She feared she might end up living in her car.

Not one to be pushed around, Linda and her neighbors decided to fight back against steep rent hikes, despite the province’s 2% cap in 2023 and 3.5% in 2024. She stood her ground and fought back, and so far she’s seeing some success.

This bold approach worked for her, but the problem persists for many others.

For example, if landlords are able to obtain written permission to raise rents above the legal limit, counting on tenants’ fears of eviction, then they’re free to raise the rent. A lot of renters go ahead and sign agreements without realizing their full rights, and once they do, it’s too late.

The other side of the story

💸 Ok, so things look pretty one-sided, for sure, but what what if we look at this from the landlords’ perspective? They argue that rising costs—from interest rates to utilities—justify these hikes.

And it’s true that just like in practically ever other business out there, input costs have soared over the past few years. Is it fair to tell a landlord they need to keep their annual rent increases to a prescribed level, even while their costs are skyrocketing? For 2024 in BC, the rent increase limit for residential tenancies is 3.5%. This is a tough one.

🏠 B.C.'s Housing Minister, Ravi Kahlon, has stepped in and there are plans in the works to make a material change to the way rent increases are calculated in the province. Later this year, the government is adjusting the rental cap to match inflation in addition to speeding up RTB dispute processes.

And Kahlon seems to have little tolerance for landlords:

📊 Eviction rates remain a concern.

Statistics Canada reports that 3% of renters were evicted last year, often because landlords claimed the unit for personal use.

Although this is a common tactic used to bypass rent caps, it needs to be legitimate. If tenants can prove misuse, they can reclaim a year’s rent. Applications for cases like these nearly doubled in 2023, showing the ongoing struggle between tenants and landlords in B.C.

In a market where rents are soaring, tenants like Linda de Gonzalez are standing up and fighting back, ensuring that landlords play by the rules. Make sure you know your rights too.

COMMUNICATIONS
Google’s Signs $100M Deal to Support Canadian News

In its efforts to comply with the Online News Act, Google has selected a Canadian Journalism Collective (CJC) to distribute the $100 million it pledged annually to Canadian news companies.

📢 Meet the Canadian Journalism Collective

The CJC, a non-profit founded in May, will ensure eligible news organizations get their share. The steering committee includes 12 independent media outlets representing various communities, such as Pivot, The Resolve, IndigiNews, and Village Media.

 🗓️ Here’s How It Will Work

The CJC will establish its governance structure soon. At this point, the timeline for distributing funds is unclear, pending Google’s exemption from the federal broadcast regulator.

As part of the process, Google invited news organizations to apply for compensation under the Online News Act, and it recieved responses from around 1,500 outlets.

The CJC will now review these and distribute funds based on criteria like being a qualified Canadian journalism organization, producing public interest news, operating in Canada, and employing at least two journalists.

Funding will be proportional to the number of full-time journalists, with small outlets expecting about $17,000 per journalist.

📺 Caps on Funding for Broadcasters

For those of you who love to hate CBC/Radio-Canada, take some solace in knowing that the organization is capped at $7 million annually, with $30 million reserved for other broadcasters. The remaining $63 million will go to other qualifying news outlets.

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