Michael Watkins
November 10, 2023
Weekly Market Update
Data from October, released on Friday, showed that Canada’s labour market may be losing momentum as we approach 2024. Canada’s labour market has been a source of strength for Canada’s economy and Canadian households. This has helped keep spending relatively robust, but there are signs it may be easing, which is weighing on Canada’s gross domestic product.
- Canada’s economy added 17,500 jobs in October, which was below the 25,000 additional jobs economists had been expecting, based on a survey by Bloomberg. Besides a few months of job losses, this was the lowest number of job additions in a month since 2022.
- Full-time employment declined by 3,300 over the month, offset by a 20,800 rise in jobs in the part-time sector. October’s decline in full-time jobs was the first since May 2023.
- Canada’s unemployment rose to 5.7% in October from 5.5% in September. October’s rate was the highest since January 2022. The jobless rate has edged higher over the second half of 2023.
- The growth in wages also eased in October compared to September. October’s labour market results added to expectations the Bank of Canada might hold its key interest rate steady at 5.00% at its final meeting of 2023, on December 6.
- Labour market results were much the same in the US. The economy added fewer jobs in October than in September, and the U.S. unemployment rate ticked higher to 3.9%. Could the pullback in the US labour market, in addition to slowing inflation, cause the US Federal Reserve Board to hold its policy interest rate steady at its next meeting?
The labour market, which was a beacon of strength for Canada’s economy coming out of the early stages of the pandemic, appears to be stalling. That could add pressure to Canadian households. In recent months, however, this negative news sometimes had a positive effect on financial markets. For example, last Friday, by raising expectations central banks might hold steady over the remainder of 2023, equity markets surged higher.
On the flip side, Statistics Canada reported that Canada’s trade surplus widened in September, benefiting from a surge in exports. Trade activity is a critical component of Canada’s gross domestic product, so any rise in net exports contributes to the overall health of Canada’s economy. While global consumer demand has slowed in recent months, it has had little impact on Canadian exports.
- Canada’s exports rose by 2.7% to $67.0 billion in September, the highest level since June 2022. September’s increase was driven by a 10.6% increase in energy product exports. Strong demand for Canadian energy products is beneficial for Canada’s economy.
- Imports edged higher by 1.0% in September to $64.99 billion. September’s increase took imports to their highest level since January 2023. Imports for motor vehicles and parts were a key contributor to monthly growth.
- Canada’s trade surplus widened in September over August in response to exports rising faster than imports. Canada’s trade surplus was $2.04 billion in September, up from a $720 million surplus in August.
- Canada’s trade with the US climbed higher. Both exports to the US and imports from the US, Canada’s largest trade partner, increased in September. Canada’s next largest trade partners are China and Mexico, where it ran a trade deficit in September.
Strong trade activity is critical for Canada’s economy. Domestic demand is limited by our small population, whereas strong trade with the rest of the world opens our businesses to over 8 billion people.
The end of the year is quickly approaching, making now a good time to start doing some year-end tax planning. The Managing Director of Tax and Estate Planning at CIBC Private Wealth, Jamie Golombek, says there are a few tax tips to keep in mind as we enter the last couple of months of the year. Proper tax planning, now, might help reduce your tax burden as you file in early 2024.
- The first step is to consider some tax-loss selling. Selling some of your portfolio that has accrued losses can help offset any capital gains made on other investments. In order to take advantage of the losses, the sale must take place before the end of the year.
- Converting an RRSP to a RRIF. For anyone who turned 71 this year, you must convert your RRSP to a RRIF by the end of the year.
- The alternative minimum tax (AMT) comes into effect on January 1, 2024. The AMT is a parallel tax system that has a minimum tax on those who claim certain deductions, exemptions and credits to reduce the amount of tax they owe. For those who might fit into this category, you can take certain steps in 2023 to avoid it in 2024, such as selling your business if you’re planning to do so, selling a property or exercising employee stock options.
- For those looking to purchase their first home, it is a good idea to open the First Home Savings Account (FHSA) before year-end. Contribution room accumulates when you first open the account. By doing so this year, you can access contribution room of $8,000, which can be carried over to next year.
These are just a few of the tax tips to consider as we close out the year. Proper planning now might help you avoid a heavy tax burden next year. For more, see the article and listen to the podcast: Year-end tax planning for 2023.
Finally, join us online for a virtual presentation on Estate Planning: From One Generation to the Next on Wednesday, November 22nd at 2:30pm.
The largest-ever transfer of wealth is expected to occur over the next decade, and it’s critical that plans are put in place to keep as much money within your family, and your legacy, and less money in the hands of the CRA or IRS. This presentation covers a wide variety of estate planning considerations, including some of the more unique and less obvious aspects that you can integrate into your financial plan and into the discussions with your wealth management team. Topics include assets in multiple jurisdictions, testamentary trusts, alter ego trusts, estate freezes, as well as probate, vacation homes, rental properties, U.S. estate tax, and even digital estate planning.
We will be joined by special guest speaker, Peter Bowen, Vice President of Tax and Retirement Research from Fidelity Investments. Peter has over 35 years’ experience in the field and will share strategies, tips and actual examples of how to structure your estate to efficiently transfer from one generation to the next.
This is a virtual event, there is no cap on attendees!
Please email Kelly Frias at Kelly.frias@cibc.com to RSVP and receive your personalized link to access the webinar, which will be sent 24hr prior to the event. If there is anyone you think may benefit or be interested in joining the webinar, please send an email to Kelly with contact information and we will make sure a link is sent to join in.