TD economists are now voicing some of the same concerns as brokers about the negative impact this latest round of mortgage rule changes will have on the economy and, more specifically, employment.
The big banks’ head economist Craig Alexander argues the tighter mortgage rules – coupled with OSFI guidelines -- will reduce consumer spending by a full percentage point next year.in 2013.
His team is suggesting those mortgage and other credit changes will force a slowing of Canada's recovery over the next two years.
In fact, the bank now expects GDP growth to come in at 2.1 per cent for 2012 and only 2 per cent for next year. That’s a downgrade of a tenth of a percentage point and 4/10 of a percentage point, respectively.
That will impact the rate of job creation, with the economy likely to eke out only modest gains to close 2012 with an unemployment rate of 7.1 per cent, virtually unchanged from the current 7.3 per cent.
Brokers had cited the thousands of jobs the housing market creates and sustains in trying to dissuade the government from moving ahead with the amortization and refi changes it announced last week.
Those warnings don’t appear to have worked, with the government focused on cooling the housing market in order to rein in on household debt levels.
Earlier this year, CAAMP laid out its arguments in a report designed to highlight the housing sector's influence.
Housing and mortgage activities, along, “could account for more than 1.35 million direct and indirect jobs (about 8 per cent of total Canadian employment,” writes CAAMP economist Will Dunning. “The housing and mortgage industry has been particularly important to job creation these past five years.”
The report estimates that from 2006 to 2011, 18 per cent of all job creation occurred as a direct and indirect result of growth in the housing and mortgage sector.
Rising home values, themselves, led to greater consumer spending, and thus, a stronger economy.
CAAMP estimates that rising home values from 2006 to 2011 led to $17 billion in additional economic activity, or about 1.2% of total GDP in Canada.
The report also stresses the soundness of that growth.