{"id":45286,"date":"2023-05-18T19:29:23","date_gmt":"2023-05-19T00:29:23","guid":{"rendered":"https:\/\/prefblog.com\/?p=45286"},"modified":"2023-05-18T19:29:23","modified_gmt":"2023-05-19T00:29:23","slug":"may-18-2023","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=45286","title":{"rendered":"May 18, 2023"},"content":{"rendered":"

Jobs? There’s lots of jobs<\/a>!<\/p>\n

The number of Canadians receiving jobless benefits through Employment Insurance has fallen to a record low, another sign of a tight labour market that is creating plenty of job opportunities.<\/p>\n

In March, around 388,000 people received what are known as regular jobless benefits through the EI system, a slight decrease from February and down 27 per cent from a year earlier, according to figures published Thursday by Statistics Canada. (People can also access the EI program for other benefits such as sickness and parental leave.)<\/p>\n

This was the lowest number of regular EI beneficiaries in Statscan records that date back to 1997, not including the early months of the COVID-19 pandemic, when the EI program was largely shoved aside and the Canada Emergency Response Benefit (CERB) became the primary mode of providing financial assistance to millions of laid-off people.<\/p><\/blockquote>\n

<\/a><\/div>\n

That’s good news for construction workers<\/a>, too!<\/p>\n

Real estate developers are launching hundreds of new condo units in the Toronto region this year, as buyer demand grows after months of fretting over higher interest rates.<\/p>\n

Ever since the Bank of Canada announced in late January that it would take a break from hiking interest rates, activity in the residential real estate market has started to rebound.<\/p>\n

Preconstruction homes are those that have yet to break ground or are under construction, and sales for these projects are often viewed as a bet on the future, because buyers wait years for their units.<\/p><\/blockquote>\n

The Hoover Institution has released<\/a> a Working Paper by Amit Seru, Erica Xuewei Jiang, Gregor Matvos and Tomasz Piskorski titled Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening?<\/a>:<\/p>\n

We analyze the extent to which U.S. banks hedged their asset exposure as the monetary policy tightened in 2022. We use call reports data for interest rate swaps covering close to 95% of all bank assets and supplement it with hand-collected data on broader hedging activity from 10K and 10Q filings for all publicly traded banks (68% of all bank assets). Interest rate swap use is concentrated among larger banks who hedge a small amount of their assets. Over three quarters of all reporting banks report no material use of interest rate swaps. Swap users represent about three quarters of all bank assets, but on average hedge only 4% of their assets and about one quarter of their securities. Only 6% of aggregate assets in the U.S. banking system are hedged by interest rate swaps. We also find limited hedging of interest rate exposure by publicly traded banks and by banks which report the duration of their assets. The use of hedging and other interest rate derivatives was not large enough to offset a significant share of the $2.2 trillion loss in the value of U.S. banks\u2019 assets (Jiang et al. 2023). The duration of bank assets increased during 2022, exposing banks to additional interest rate risk. We find slightly less hedging for banks whose assets were most exposed to interest rate risk. Banks with the most fragile funding \u2013 i.e., those with highest uninsured leverage — sold or reduced their hedges during the monetary tightening. This allowed them to record accounting profits but exposed them to further rate increases. These actions are reminiscent of classic gambling for resurrection: if interest rates had decreased, equity would have reaped the profits, but if rates increased, then debtors and the FDIC would absorb the losses.<\/p><\/blockquote>\n

The BoC has released its Financial System Review 2023<\/a>:<\/p>\n

As the adjustment to higher interest rates continues, future periods of stress are possible, and they could persist longer than the acute stress that happened in March. This could exacerbate two existing vulnerabilities discussed in this document:<\/p>\n