With Canada’s economic outlook dominating the headlines, how do you cut through the noise to make sound financial decisions? In this episode of Smart Advice, host Carissa Lucreziano and CIBC Senior Economist Andrew Grantham break down the latest interest rate cuts, shifting housing market trends, and Canada’s evolving trade relationship with the US, to provide practical insights on what it all means for Canadians. Whether you’re navigating a mortgage renewal, entering the job market, or simply seeking financial resilience, you’ll find clear, actionable advice to help you make confident decisions.
[04:16] Andrew: “We are seeing that, particularly with the population growth we've seen in some of the prairie provinces, for example, there is the demand there, and even though building has increased in those provinces, we are still seeing that the housing market there is reasonably strong and prices are continuing to rise a little bit.”
[11:30] Andrew: “In terms of that cross-border shopping activity, a big theme over this year, even before talking about those Black Friday Sales, has been the drive to buy Canadian.”
[15:48] Andrew: “What's interesting though, in the current situation is that that excess increase in unemployment for young people has gone above and beyond even what we would typically see given what's happened on the economy as a whole, on a national basis.”
As Senior Economist with CIBC Capital Markets, Andrew Grantham has a wide range of experience in different areas of economic and market forecasting, providing both a Canadian and global perspective. His focus includes interest rates, the Canadian housing market, consumer spending, and trade. Through his work, he has helped Canadians understand how big trends connect to everyday financial decisions. Andrew often shares insights on mortgage affordability, youth unemployment, and cross-border ties.
Andrew blends data-driven analysis with a practical perspective on the Canadian economy. In his analyses, he highlights both the challenges and the opportunities that lie ahead. His goal is to help Canadians move past headlines and focus on what matters for long-term resilience and growth.
Connect with Andrew Grantham on his LinkedIn or CIBC Author Profile.
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Carissa Lucreziano: In today's economy, Canadians don't just want the headlines. They want to know what it all means for them. What does a rate cut mean for my upcoming mortgage renewal? How does the current trend in the housing market impact my buy or sell decision? Is a recession looming, and how does all of this impact my investment decisions to build long-term wealth?
Welcome to Smart Advice, a podcast connecting you with timely financial advice, investment strategies, and economic trends, empowering you with insights to make informed decisions about your money. I'm CIBC's financial advice expert, Carissa Lucreziano.
Joining us is Andrew Grantham, Senior Economist with CIBC Capital Markets, who brings both a Canadian and international perspective. Andrew will bring the expertise, and we'll break it down to what really counts, the practical insights Canadians need to navigate uncertainty and position themselves for financial success.
Andrew, welcome to the Smart Advice podcast.
Andrew Grantham: Well, thank you for having me.
Carissa: Super excited that you're here. I know we have a lot to talk about, so let's dive in.
The Bank of Canada and the Fed both trimmed rates by a quarter point this September. For Canadians, it feels like a bit of relief after years of rising costs. But does that actually put more breathing room in household budgets?
Andrew: It does for some households, but not all households. If you are a mortgage holder, where you have a variable rate mortgage and with variable payments, you will see a little bit of relief in terms of what you are paying. If you have a line of credit, you will get a little bit of relief in terms of what you are paying.
But when we talk about interest rates and interest rate cuts, we also have to talk about what they mean for fixed-rate mortgages. What we typically see is that by the time that a central bank actually cuts interest rates, financial markets have already been pricing that cut in.
If financial markets have already been pricing in that cut in, that means that the two-year bond yield, the five-year bond yield, and then, by extension, the five-year mortgage, fixed mortgage rate, has already responded.
We've seen this interest rate cut from the Bank of Canada. Anyone thinking that they can go out tomorrow and find a cheaper two, three, or five-year mortgage rate may be a little bit disappointed, because markets were fully pricing that in already. And so those longer-term interest rates haven't really moved too much on this latest move. What has moved are some of those variable rates.
Carissa: If we think about the housing market, it's always the center of attention in Canada.
People are paying attention to trends. Is it a buyer's market? Is it a seller's market? What we have come to learn is that there are different considerations across the country, from overheated urban centers to slower-moving smaller markets.
Can you talk about the current state of the housing market today, and what should Canadians really take away as they look ahead?
Andrew: I think you hit the nail on the head with the question there. There's just so many different housing markets in Canada. It's not just one market.
I think what we are seeing from the national basis, a lot of the national figures are really being influenced by what we're seeing in those large urban centers, as you suggested. Some weakness still, in the housing market in Ontario and BC.
Basically, these are the markets where — going back to affordability — that have the highest prices still relative to people's incomes. Therefore, you have to take on the highest mortgages generally, to be able to get into that market.
Even with the interest rate cuts that we have seen, what we are seeing in those two markets, and particularly when we talk about Toronto and Vancouver, rather than just Ontario and BC, what we're seeing there is that this is still a buyer's market. There are still more sellers than there are buyers, and that has put in a little bit of a downward pressure on prices.
In the rest of the country, the housing market is actually now starting to recover and actually starting to improve. We are seeing that, particularly with the population growth we've seen in some of the prairie provinces, for example, there is the demand there.
Even though building has increased in those provinces, we are still seeing that the housing market there is reasonably strong and prices are continuing to rise a little bit. There's a lot of variance across the country right now when it comes to the housing market.
Carissa: Can you speak to the condo market a little bit. How does that differ from just a regular residential market? Is there something to pay attention to there?
Andrew: The condo market, particularly in Toronto, is extremely weak right now in terms of demand, prices coming down in that market.
But what we're also seeing as well — or not seeing, more to the point — is that we're not seeing much building at the moment, because the developers need to pre-sell those units. And if they can't pre-sell the units, then that supply is going down, that new building is going down.
This will eventually help to stabilize that market. It's not happening yet, but what will happen in the next year or two is that at some stage, there will be a slight pickup in demand because of lower interest rates, maybe prices will come down a little bit more.
But because we're not seeing the supply at the moment, it takes less of a pickup in demand. Because we don't have that supply, it will take less of a pickup in demand to stabilize that market. If anyone's thinking about getting into that market, don't wait too long, because again, it won't take that much in terms of new demand to eventually stabilize.
Carissa: That's a good perspective. And then, just like the real estate market as a whole. Do you think Canadians are still waiting on the sidelines, waiting for continued rate declines, or have we settled into what the rate environment is from a comfort level?
Andrew: I think where mortgage rates are today, they're obviously nowhere near what we saw during the pandemic, but people shouldn't expect them to ever get back to where we were during those pandemic years.
We are reasonably close to where mortgage rates were, let's say, back in 2019. Back then we had a reasonably balanced housing market. I think we're getting down to the sort of mortgage rates now that Canadians should expect rates to fluctuate between over the next two to three years. They may get a little better, they may go up a little bit. But we shouldn't expect too much more variance now from where we are today.
Going back to your earlier point on fixed and variable: what should we do if rates are not going to change too much from where they are today? We have seen massive fluctuations in the past five years. That's very abnormal in terms of interest rates; we should be stabilizing at a more normal level.
Now Canadians should just be thinking, “Okay, which rate gives me the payments that I can manage and gives me the comfort level that I can manage, rather than trying to time the market?” Because I think we are now down to a kind of a zone, a level, where interest rates won't change too much.
Carissa: Yeah, and that's great advice. Thinking about it from a payment perspective, and if you have a mortgage coming up in the next six months, it's a good time to really take a look at what those payments are and really understand the difference.
Let's shift south of the border. Another big topic, Canada and the US are so closely linked that even small moves in Washington ripple north. Mark Carney has been vocal about strengthening those ties. What's his vision and how could a renewed Canada-US partnership shape economic confidence here at home?
Andrew: That's a very interesting question. We've been through a lot this year in terms of the ups and downs, and what we've been threatened with and then unthreatened with in terms of trade and tariffs. I think what Carney is doing right now makes sense, because we haven't rushed in to get in a trade deal with the US.
And I think the reason why we haven't done that is that because of CUSMA, we have a lot of goods, still, that are entering the US tariff-free. When we look at the tariffs that our companies are paying to the US as we export to the US, really, we are only being impacted by those sector-specific tariffs on steel, aluminum, autos, lumber.
Goods outside of that, we're really paying little to zero tariff on average. That's actually still better than a lot of other countries are doing. There's no rush to get a deal done if that deal can't be a good deal.
I think what we're doing is we're trying to figure out a way to get some deduction in some of those sector-specific tariffs, maybe the aluminum industry, for example. But there is really no rush.
The plan right now is to strengthen partnerships outside of the US. Make sure that we can, at some point next year, renegotiate CUSMA and still maintain that exemption that we have under that agreement, and also try and get a deal in place that reduces some of those sector-specific tariffs. But at the moment, there's no rush to do that, because we do have those exemptions.
Carissa: Yeah, and on that, what industries and sectors in Canada do you think will feel that continued pressure until there is more of an agreement in place?
Andrew: Well, it is those sectors that have been hit by those sector-specific tariffs. So steel industry, aluminum, the auto industry. When we look at what regions of Canada are most affected by these tariffs, it really is Ontario and the manufacturing industries in Ontario, and also Quebec as well.
When we look at the tariffs that we are currently paying to the US on average, it's those two provinces that have been hit the hardest. Most of the rest of Canada, the goods that they are sending to the US are still relatively tariff-free, and so the average tariffs that companies in those provinces are paying are still quite low.
Carissa: That's a really good perspective. But let's talk about consumer spending, the dependencies and the confidence that drives that spending. Black Friday is fast approaching, and for many Canadians, cross-border shopping, whether online or in person, is part of the tradition.
With the loonie under pressure, what does this mean for consumers heading into the holiday season and in general? How should Canadians think about the dollar when it comes to that big bucket of travel and spending?
Andrew: I think the Canadian dollar, where we are today, has really been influenced by what's happening with the US dollar. The US Dollar did strengthen earlier in the year, so the Canadian Dollar weakened.
We got above that 1.40 mark in terms of the USD-CAD. It has improved a little bit since then, but I don't think we should expect too much more improvement, or at least too much more improvement too quickly, in terms of the Canadian dollar.
In terms of that cross-border shopping activity: a big theme over this year, even before talking about those Black Friday Sales, has been the drive to buy Canadian. The cross-border shopping trips are actually down quite significantly year over year terms, because people are kind of keeping their money in Canada a little bit more.
I think what we will see during this holiday season, if we do see a continuation of that, more buy Canada, fewer cross-border trips. Again, that's not really a Canadian dollar story: that's a buy Canada story. Maybe this will be a good holiday season for some Canadian retailers who don't rely on those cross-border activities.
Carissa: Well, we’ll watch out for it, because it is fast approaching.
Let's talk about the R word: the question on a Canadian recession. It keeps on creeping into the headlines. From your perspective, are we already in one? Or is it simply, the economy is just slowing in a way that doesn't quite fit the formal definition of a recession?
Andrew: I think, here, there's a difference between the technical definition of a recession and how people feel.
Because I think a lot of people will feel, given that we have an unemployment rate that's above 7%, we've got these trade issues with the US that the economy did contract for a quarter, in the second quarter of this year. A lot of people will feel like we are already in a recession.
Particularly if you are living in Toronto, Vancouver and you're seeing those declines in home prices, as well. The condo market, in Toronto, especially, it would feel like a recession in those regions.
Technically, we are not in one, and we do not expect us to have a recession, because we do expect that the Canadian economy will start on a road to recovery in the second half of the year. That contraction we saw in the second quarter, we will get some growth later in the year.
As exports adjust to what would be a lower level, but still a little bit of a rebound from the very lows that we were in in the second quarter, when those tariffs first took hold. And then also a little bit of consumer spending increase, in the lack of cross-border shopping, bringing some more of that spending into Canada.
Those two factors, I think, will mean that technically, we will avoid a recession. Although for a lot of people, particularly in Ontario and BC, it probably feels like we are already in a recession.
Carissa: You mentioned unemployment. The job market really tells us a lot about the health of our economy. You mentioned that unemployment hit 7.1% and that equates to 66,000 jobs lost, as reported in August. The majority of these roles, or these jobs were part-time jobs. What does that mean for young Canadians entering the job market, and how is the job market shifting?
Andrew: This is something that's been a big story this year. It’s not just the rise in the unemployment rate, but how elevated the unemployment rate is for young people. Young people, we define, or Statistics Canada defines in their employment numbers, as between 15 and 24 years old, and that's kind of what they define as youth unemployment.
What we are seeing now is again, going back to that recession question: Does it feel like a recession? Well, it sure does for young people trying to find jobs, because youth unemployment is almost double the national average, and at levels that you typically don't see unless the economy as a whole is in a recession.
This tells us a few things. The first thing that this tells us is that hiring within the economy is very weak at the moment. Why does it tell us that? Well, young people are generally what we would call the new flow of labor into the market. When an unemployment rate increases, this typically happens, because demand doesn't keep up with supply.
You've got these new young people entering the market, but the demand isn't there, and so unfortunately, young people always see their unemployment rates increase more than the national average, and that's certainly happening this time around as well.
What's interesting though, in the current situation, is that the excess increase in unemployment for young people has gone above and beyond even what we would typically see given what's happened on the economy as a whole, on a national basis.
There are, I think, a few factors there. There's a supply factor where we did have a big rise in the student population between 2022 and 2024. But I think there's also a demand factor that goes outside just the weakness of the economy, and that's potentially some of the technological changes that we've seen have taken away some of those job opportunities for young people.
You mentioned the part-time roles in August. A lot of young people, what do they do? As they are studying, they work in either food and accommodation services, or maybe they work part-time in retail. We know in retail, there's been a technological change in terms of self-checkouts that has taken away some of those job prospects.
When it comes to people leaving university and trying to find their first job, that entry-level job, we now have AI taking over some of the roles, the research roles that may have been done by young people straight out of university. Some companies trying to cut costs may be using AI to try and do those research roles now.
It's very, very difficult for everybody in the labor market, but particularly for young people right now.
Carissa: Yeah, great perspective.
If we think about the economic markets, all of the headlines that hit Canadians, one thing on Canadians' minds is how to stay financially resilient. As Canadians continue to try to digest everything that's going around, what is your advice for Canadians? What can they do to remain financially resilient and position themselves to make confident choices for the future?
Andrew: I think our advice to anyone in terms of financial advice, would actually be fairly similar. Whether the economy is strong or bad, if you do have a job right now, if you are a young person who's been able to get that work, putting some money aside for a rainy day is always a good idea.
I would think that when it comes to investing, whether it be looking at mortgages or whether investing in equity markets, really take a long-term perspective rather than trying to time the market. There's a lot of headline risk, as we call it, in financial markets right now because of Trump and tariffs and everything else that's going on around the world.
You always have to take a long-term view. You would never be able to time everything perfectly, but putting some money aside, taking a long-term view, is really the best advice you could give in most circumstances, but certainly in today's environment.
Carissa: On that long-term perspective, as we wrap up, let's fast forward a few years, 2026, 2027, even 2028, because Canadians are thinking a little bit more short-term than they ever have, because of how things are changing on a day-to-day basis.
If we look beyond that short-term headline and short-term market swing, what opportunities do you see emerging for Canadians, and what trends should people be paying attention to now that might shape growth and their financial decisions down the road?
Andrew: This is a great question, because at the moment, there is a lot of negativity around the global economy, but also the Canadian economy as well.
We are adjusting to a new trade relationship with the US. We are adjusting to a new interest rate environment where rates have come down, but they're not as low as they used to be. Some households are still adjusting to that, and they're having to adjust their spending accordingly.
When we look longer term though, for Canada, I do see that there are great opportunities for growth in the Canadian economy by themselves, but also relative to other developed economies.
We now have a federal government that at least is talking about investing heavily in infrastructure, and that will help us get more out of our natural resources. Be able to get those resources, not just to the US, but to other markets as well. That should help us in terms of that longer-term growth.
We also have here in Canada, a population that, yes, it is aging, but it is not aging anywhere near as quickly as maybe some of the populations of Europe, the UK, for example, and other developed economies. That gives us potential to grow the economy, because we don't just have the natural resources to exploit, but we also have the human resources there.
We do have an educated labor market. We do have a reasonably skilled labor market. With the unemployment rate today above 7%, we clearly have the scope to make better use of that available labor.
I think that there are a number of long-term things to be optimistic about for the Canadian economy, even if today, reading some of the headlines, it doesn't really feel that way.
Carissa: It can be heavy sometimes reading some of those headlines, but that is a really optimistic forecast.Thank you so much for your insights.
Andrew: Thank you for having me.
Carissa: Thank you for tuning in to Smart Advice. I'm Carissa Lucreziano. If you enjoyed this episode, feel free to share it with your social network. For fresh perspectives and actionable insights, subscribe to Smart Advice wherever you get your podcasts.
If you're ready to explore the next chapter of your financial goals, visit cibc.com/smartadvice to be connected to one of our advisors and for resources and guidance, all designed to help make your ambitions real. Thanks for listening.