Chilling

While it’s too damn hot to let your dog out in half the country, a big economic chill is blowing through. Change is coming, it seems.

Look at oil. The West Texas stuff has cratered to just $67 US a barrel, with the Canadian crude at a lowly $53. Not long ago we were well over $100 with dire forecasts of $150. But Trump’s TACO moves and capitulation to Iran have Mr, Market convinced global supplies will be moving in the future as they did in the past.

Cheaper oil means less inflation. There’s no doubt if these energy prices hold the surge we’ve seen lately in the CPI will reverse. That’s the news from the crypto market. After tanking 20% in June – the worst performance in four years – Bitcoin today jumped higher on the expectation interest rates will stay where they are, and possibly fall in the wake of this morning’s jobs report.

It was unexpected. Some people called it ugly. Others rejoiced. But it certainly fell short of what economists had foreseen.

Instead of chalking up a fresh 113,000 jobs, as anticipated, the US economy turned out a lowly 54,000. At the same time another 74,000 paycheques were wiped away in revisions for the past two months. Concurrently, half a million people left the American workforce – a meaningful chunk of them having been deported or detailed by ICE thugs.

That broke a three-month hiring binge. It also came amid persistent and growing fears the current low unemployment rate – just 4.2% – might represent Peak Jobs, with rapid AI deployment poised to eat thousands, or hundreds of thousands, of positions.

Okay, add it up.

Trump balks. Oil falls. Energy crisis goes away. Investors figure interest rate hikes are off the table. Inflation fears fade. Hiring cools fast. Labour force contracts. War costs drop. The economy stabilizes.

Now blend in the New Guy running the American central bank – the Fed – and you have several more reasons why the next move for interest rates will be down, not up. Kevin Warsh succeeded Jerome Powell as chair of the CB. He’s Trump’s man and we all know that 47 attacked and humiliated Powell repeatedly for not crashing the cost of money – to stimulate the economy, lower family financing costs and make the swelling national debt easier to service.

So if things are not too hot, and not too cool, they might be just right for the first Warsh cut to happen by the end of 2026. In 2027, it appears a no-brainer.

Wassat mean for us?

Well, the Bank of Canada has a 92% track record of following the Fed – likely to continue. Also the loonie will benefit as the US$ falls along with interest rate expectations. The plunge in oil prices will whack Canadian export revenues, adding more reasons our CB may want to throw some stimulus around in coming months. Plus, the Americans yesterday formally indicated they’re not willing to let the NA trade deal continue. Instead we’ll have to fight about potential changes with the White House. (If no new deal is done the existing one will hold for ten years, at which point Donald Trump will be a memory. Dog help us otherwise.)

In short, no reason for mortgage rates in Canada to rise. Lots of reason to expect them to decline. Inflation will moderate along with energy costs. The looming US midterm elections will bring some hope that tariffs will go away in the next few years (our cars, lumber, steel and other sectors have been hard hit by the Yanks). The darkness is lifting. The dawn beckons.

Stats published by real estate boards in coming days will be soggy. No resurgence in sales. No big drop in prices. Heaps of inventory. July could well be a terrible month for sellers; a rewarding time for buyers.

And suddenly there is a lot more logic to arranging a variable-rate mortgage. Go figure.

About the picture: “Seeing the occasional cat pic lately makes me think you may be running short on those of the superior pet!” writes Don. “Here’s a picture of Abba in her younger days – still going strong at twelve though. As always, thanks for the education and ignore the comment section.”

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

Source: https://www.greaterfool.ca/2026/07/02/chilling-2/