The big slide

Mr. Market woke up on Monday and decided there’s a 90% chance The Fed will drop interest rates by a quarter point Wednesday. Lousy jobs data on Friday. We get it. The first reduction since a certain person became president.

But wait. There are now 10% (and growing) odds the central bank will chop by a full half-point.

Moreover, the Wall Street guys also woke up, looked into their Brazilian single-origin cold brew from Black Fox Coffee and decided there could be three rate cuts coming between now and Christmas.

This matters here in the land of the free, sensible and centrist beavers where we don’t arrest people fr building battery factories. The Bank of Canada is slated to review its rate on the same day as the Yanks, and there will be a similar outcome. A drop. After months and months of being on pause, we’re now (finally) heading into an era of cheaper money. The big slide.

This has realtors giddy. Lenders have their fingers hovering above the ‘CUT!’ button. Politicians watching the labour market shrink like a dude in a northern lake will welcome the CB’s action. It sure looks like we are on the path to 3% mortgages once again. Combined with a 20%+ price drop from 2022 highs, will this be enough to reverse the recent sales plunge?

However, in the good news for borrowers lurk dangers. If cheap money means a recession is coming, would it actually be a good time to borrow money to buy real estate? Or anything?

As mentioned, people are worried about jobs. “The US job market is definitely weakening below most estimates of lowered breakeven rates in light of tighter immigration policy,” says Scotiabank economist Derek Holt. “When paired with Chair Powell’s pivot at Jackson Hole, the result cements a rate cut on the 17th. The residual questions are how big and/or how frequent.”

As you probably heard, Friday’s numbers sucked. Job creation slowed to a stall in the States last month and is now judged to have been negative in June. Whoops. That’s four crappy months for the US, and even Trump’s replacing of the head data person brought no change. Uncertainty is making employers pull in their horns. Tariffs are increasing costs. ICE is freaking everybody out – in a country where 40% of the Ag and construction sectors rely on migrant or undocumented employees.

Canada is chilling, too, of course.

The jobless rate here is now 7.1%, which has the yellow flag out. “A 66k employment decline Canada in August was after a 41k contraction in July, and adds to evidence that the trade war is taking its toll on Canadian labour markets,” say RBC’s economists. “The worsening trend in the summer also mirrors condition south of the border – job growth in the U.S. largely ground to a halt since May and the unemployment rate has also edged higher.”

Says TD: “July and August’s job losses have now more than reversed June’s outsized gain, and the Canadian economy has lost 39k jobs since January. The unemployment rate has risen half a percentage point over the same time period. It could be worse though, a slowdown in labour force growth is keeping the unemployment rate from rising too high, despite weak labour demand.”

So weakness in both countries is leading to the same conclusion. Rates will fall. Multiple times. And it starts next week. Meanwhile, predictions of worse to come are fading. Most Canadian exports to the US flow freely – our overall tariff rate of about 5% is the best in the world – and domestic spending is holding as household wealth grows. Stock market gains, RBC figures, have wiped out real estate declines.

“We’re changing our call from cuts in October and December this year,” says CIBC. “We’re now expecting cuts in September and October.” That gaggle of economists says the easing will continue until the Bank of Canada has shed a full 1% from its current rate of 2.75%. That will happen by the middle off 2026.

That’s the consensus. “The negative job market report today increases the odds that the BoC could see fit to cut interest rates further,” adds Royal’s economists.

So, it’s coming. A CB rate of just 1.75% in Ottawa. A big, spendy, house-friendly federal budget in October. Home loans with a 3-handle. And with every passing day, Canada looks more stable, welcoming, rational, well-managed and less batshit crazy than the country to the south.

Three per cent mortgages and properties a fifth cheaper? No recession? Open your eyes, kids.

About the picture: “Love your blog and am here to answer your call for dog pics!” Writes Dan. “This is our 15-year-old Yorkshire-poodle, Jackson. When we adopted him five years ago, he needed a few surgeries to correct some nagging health issues. Thankfully, my partner and I read you blog and could face those vet bills head on. He’s in great shape now for an older doggo. How can anyone resist that face? All the treats for the good boy! Keep up the great work.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/09/08/the-big-slide/