Employment Boom in Canada: Implications for Developers and Land Valuations

Recent job market expansion could lead to higher property demand and rising land prices.

The December 2024 labor market report highlights a remarkable recovery in Canada’s employment landscape, with over 90,000 new jobs created. This surge in employment underscores a strengthening economy, which carries significant implications for real estate developers and land values. As employment and economic activity increase, the real estate market typically sees heightened demand for residential, commercial, and industrial spaces. Developers must pay close attention to these labor market trends as they craft strategies for 2025, especially given the potential impacts on inflation, interest rates, and regional disparities in growth.

In December 2024, Canada’s labor market experienced a significant boost, adding 90,900 jobs—far exceeding the anticipated 25,000 and marking the largest increase in nearly two years. This surge, predominantly in full-time positions, led to a decrease in the national unemployment rate to 6.7%.

(Source BCREA)

The robust employment figures suggest a strengthening economy, which could influence inflation and interest rate decisions in 2025. Typically, increased employment boosts consumer spending, potentially elevating demand for goods and services and exerting upward pressure on prices. However, in this instance, wage growth has remained moderate, with average hourly wages for permanent employees rising by only 3.7%.

Given these dynamics, the Bank of Canada may reassess its monetary policy stance. While some economists had anticipated a 25 basis point rate cut to address economic slack, the unexpected job growth has tempered these expectations. The probability of a rate cut has decreased from 70% to 61%, indicating that the central bank might opt to maintain current interest rates to balance economic growth with inflation control.

In British Columbia, employment rose by 0.5% to 2.844 million, with a gain of 14,000 jobs in December. However, employment in Metro Vancouver fell by 0.1% to 1.601 million. The unemployment rate in B.C. increased by 0.3 percentage points to 6.0%, while Vancouver’s unemployment rate rose by 0.2 percentage points to 6.5%. Overall, B.C.’s labor statistics have diverged from national patterns, with employment only 0.2% higher than in December 2023.

December’s jobs data shows a second consecutive month of strong employment growth, with 12 out of 16 measured industries experiencing employment gains. This broad-based job growth may signal the onset of an expected economic recovery in 2025. Despite this positive trend, the unemployment rate remains stable at a higher-than-desired level. Consequently, it is anticipated that the Bank of Canada will lower its policy rate two more times over the first half of 2025 before pausing to assess the need for further stimulus.

In summary, December’s employment surge reflects a resilient Canadian economy. However, the interplay between job growth, wage trends, and inflation will be pivotal in shaping the Bank of Canada’s interest rate decisions in 2025.

Conclusion

• For real estate developers, the December employment surge and the potential for lower interest rates in 2025 present both opportunities and challenges.

• Rising employment could translate into higher land values and stronger demand for new developments, but developers must remain cautious of regional variations and inflationary pressures that could affect construction costs.

• Strategic planning and a focus on high-growth areas will be key to capitalizing on these economic trends while mitigating risks in an evolving market.