Oliver Foote

The State of The US Dollar, Debt, and Canada

I have been spending a lot of time reading and following the various things that are happening in the United States over the past couple of months related to the economy, tariffs, bonds, currency, and more. There were so many fascinating pieces written about Gold’s bull run, treasuries no longer being viewed as a “safe haven asset”, all the drama with trade. I’ve been reading about Germany’s economy and China’s EV dominance. Really globalizing my reading and building an understanding of world macroeconomics, rather than just North American. I even spent some time making daily update videos about the economic news @OliverFoote on YouTube. Through all that I’ve been learning and doing I have been keeping up with most of these events and today I wanted to talk about some of what I’ve learned and maybe help you learn a thing or two as well.

The major theme I want to cover today has to do with the supremacy of the US Dollar and how The Big Tax Cut Bill that just passed in the US will affect it as well as why Gold has been doing so well and what to expect for the US going forward. I’ll discuss how the Canadian Dollar will be affected by this sharp downturn in the US Dollar and when might be a good time to consider buying some US Dollars, and what to consider about the Canadian vs. American currency.

What “The Big Beautiful Bill” Means for The US Dollar:

I’m going to structure this section in sort of a timeline format of the last 4-5 months to discuss what has been going on with the US Dollar and everything that is linked to it. When Trump started his tariff war with the world in February, many global markets began to panic including the US. If the US was going to put tariffs on the world, most economist were suggesting that they would backfire in a big way and the US would see a huge hit to their GDP growth and end up in a recession. It seemed as though there was a new headline every week, and everyone was feeling the fatigue of this whole trade war situation. Every week something new. As many people astutely pointed out, this is not a good environment to do business in. Therefore, some business owners decided to hold off on purchasing, hiring, firing until things calm down a bit and it caused a lull in economic productivity. Looking at the statistics even prior to the trade war graduating students were seeing possibly the worst job market since the 90s and I wouldn’t be surprised in retrospect with all these developments we find out it was even worse. As a recent graduate myself it is hard to tune out this noise, but over time you learn to focus on your own path and continue hunting.

After a bunch of flip flopping on yes tariff, no tariff, tariff pauses etc. Something interesting began to happen in the treasury market, while stocks were falling, the yields on treasuries went up. To understand how this works, generally, when the market falls, people will move their money into US treasuries which are essentially just US government bonds. These bonds trade on the open market, and if the demand for these bonds goes way up, then the yield, the amount of interest the bond pays to the holder, should in theory go down, since there’s so much demand. BUT, what happened, was that people were selling US Stocks AND US Bonds, problem? Potentially. Due to all the uncertainty and the inability of the president to commit to anything, investing in the US and keeping money in the US began to be viewed as riskier.

If you look at countries whose bonds are viewed as VERY risky right now you might look at Ukraine, where there is currently a war happening, a 1-year bond is paying 39% right now. Investors are demanding an ultra high “risk premium” on those Ukraine bonds because there is a reasonable chance Ukraine might not pay it back. Meanwhile, the titan of the world, the global superpower, the “safest” country (to hold your money in), the USA. Is having a risk premium added to its bonds? Crazy! US 30-year bonds at of the start of the trade war were trading around 4.5%, and a few months later they had climbed to almost 5%! As of writing they have lowered a bit to 4.82% and the stock market has recovered and hit new all-time highs, so it is possible this bond fiasco might be short lived? We shall certainly see. Wall Street came up with a great name for trading on something that Trump say he is going to do then later turns out he is unable to do it. The TACO trade, or Trump Always Chickens Out trade. Meaning that whatever Trump says probably will not come true.

This lack of confidence in the US and the US Dollar, is borne out by two major indicators, the Dollar Index which is down -10.6% year-to-date, and Gold which is up +28.41% year-to-date, much more than the S&P 500. The Dollar Index simply compares the US Dollar’s performance to a basket of other major currencies, so you could say that it’s underperforming by 10% this year, which is quite a shock if you look at the crazy strong GDP growth in the US just before Trump took office. Then you have Gold, which is an asset that people flock to in times of uncertainty, and there is a lot of that in our world today. Among other reasons, if the US Dollar loses it’s value, Gold is a hard asset that won’t inflate away like a currency can. Gold will always have an intrinsic value versus paper money. These two things moving in opposite directions are a pretty damning report card for how the world views what the current US administration is doing, on top of the bond risk premiums increasing.

Now to present day, where does this leave the US currency? Well, it’s not looking great, the US dollar will likely continue to get weaker and eventually when the Fed cuts interest rates, bond yields should go down due to lower demand for lower coupon rates. This in theory will also lead to demand for the US currency to drop even further. The revisions and cuts to GDP forecasts will also hurt the US Dollar if those GDP drops become reality. However, that being said, I don’t expect to see 1.30 USD/CAD exchange rate because Canada and various other nations across the globe right now, are having a hard time with economic growth at home, and virtually every developed nation is facing debt & cost of living problems.

Our interest rates in Canada are lower than the US. Oil prices, a big component of the value of the Canadian Dollar, are relatively low and not expected to rise dramatically, and our economic growth continues to be slow. Even though the US might be metaphorically shooting itself in the foot. Canada’s economy is simply not as strong to begin with and relies heavily on the US as a trading partner. However, we have seen the exchange rate of USD to CAD come down from 1.45 to 1.35. If we get anywhere in the low 1.30s, I think I will look to purchase a good amount of US Dollars because in the long term, I still believe that no one will be able to dethrone the US Dollar as the world’s currency and I believe that capital, and brains, and great value-generating companies will continue to be born in the US. They will continue to concentrate global asset growth and capital unless some drastic major changes in powers or leadership is made. Barring the US empire falling completely, I don’t think there is much else that can dethrone the US Dollar outside of China.

Now we get into something that might cause the US Dollar some more headache in the short to medium term, and that is this “Big Beautiful Bill” that just passed in the US. This effectively adds $3.3 Trillion Dollars to the US deficit after accounting for the spending cuts vs. the tax breaks. The total debt of the US is currently sitting at around 100% of GDP, and this bill is likely going to send that much higher to 120-130% of GDP in the next 10 years. The interest payments on the US debt right now are around 13% of the governments budget. To put that into perspective, 13% of all the money the government spends, is essentially getting lit on fire. This debt “burn rate” will likely increase because all of the new debt being issued today is being refinanced at todays higher interest rates which are much higher than they were in 2017 during Trump term one. All of these tax cuts will have end up being financed with more debt. They will have to come up with $3.3 Trillion Dollars to cover the shortfall and keep the government operating.

Making an analogy out if this can put this pile of debt into a more relatable perspective. Lets imagine that your household is paying 15% of your monthly income just to service your debts, what might happen? Well, it is likely that you are going to spend much less money on discretionary items, you are going to buy cheaper items, or move to a smaller home. Alternatively, you are going to end up in a debt spiral that you cannot get out of and debt will take over your life and lead you to bankruptcy (worst case scenario). In the case of the government, this debt means less spending on social services, less spending on infrastructure, roads get worse, transit gets worse, everything gets a little bit worse for a lot of people, the quality of life goes down. The government can never really go bankrupt because they can just print more money and inflate away their debt, but this destroys confidence in the economy and can lead to some pretty terrible outcomes. By introducing even more debt, the US will be adding trillions of dollars to the money supply (money in circulation), and we have seen in the very recent past that printing this type of money can lead to inflation.

A likely outcome of all this debt is that the US will grow slower and at some point be forced to inflate its debts away. If there is risk of inflation, the fed will keep rates high for as long as they can, meaning that the interest on this new debt will be expensive, leading to fewer services and worse economic conditions. By not getting this debt under control it really looks like the US is in a lose-lose scenario. In summary, what I think will happen with this US bill is we will see a slow but consistent devaluing of the US Dollar and a strong but consistent inflation in asset prices. If you look to other times that the US printed a lot of money, or if you provide wealthy people with a way to save more money through tax cuts, the way the world is set up these days, a lot of that money does not get spent, but rather gets dumped into assets. If you hold US Stocks or real estate right now, I think you can expect to see the value of your holdings increase in the short to medium term. But if this debt and money printing does start to hit growth and consumer spending, then expect the market to pull back a bit.

In conclusion, I don’t think this bill passing will be a positive thing for the US and the USD on the whole, but I also don’t think it’ll be earth shattering to them in the short term. There is a slight possibility that the US might be able to outgrow the speed of the increase in the debt, and this possibility is made stronger by investment in AI (but as with anything that has a lot of hype, this feels like a bit of an overinflated asset category right now, could end poorly if companies struggle to prove they are able to monetize their AI models). Even with the assistance of AI and the potential growth and productivity gains, I’m not certain it will be enough to make a huge difference in the story of the US debt. It is possible that whoever the next president is reverses these changes, and might actually try to reign in the debt, but for the time being it does appear that the US is on a bit of a collision course with the future, no one can really predict the long term impacts and the US does still have the fact that everyone wants dollars and looks to them for currency stability and global trade… for now.

If you’re trying to compare which currency you think will do great in the future you have to consider one entire economy against another entire economy. I still believe that despite all the debt in the US, they will continue to grow at a faster pace than Canada. They hold these mega, global, high margin “superstar” firms and I just don’t see how Canada can compete with that dominance and the entrepreneurial spirit of the US and the brain drain Canada experiences to the US. Canadian households on the whole also have less disposable income than US households and the household debt to GDP ratio in Canada is quite frankly insane and much higher than the US largely due to the price of housing here. On the individual level in Canada people are not able to spur as much growth, spend as much money, or feel that they can take as much risk as their American counterparts. In the long term, I think holding some USD to hedge against a decline in the Canadian Dollar is probably a reasonably safe bet, only time will tell, but that’s my verdict for now. If there are significant changes to either the US state of the economy or Canada, then this strategy may warrant updating.

Let me know your thoughts via email or in the comments.

Cheers,

-Oliver

Why Are Rentals Affordable All of a Sudden?

As someone who likes to stay on top of what’s happening in Real Estate and the economy. I have noticed something happening that honestly, I’m not sure many people saw coming. Rental prices are dropping in major city centers across Canada, and have been on a slow but steady decline for a good 6-8 months. The main reason for this change simply has to do with a supply and demand problem (on many levels), and it’s all happening at the same time, right now.

Demand:

Let’s talk about demand first. Allow me to tell you a bit of a short story about recent events, namely something called COVID-19. The effects of the pandemic are beginning to show up in so many different aspects of society, and what I’m going to talk about here is another example of how generational of a shift was caused by COVID. Prior to COVID, people knew we had a bit of a housing shortage in Canada, in bigger cities multiple offers were common, but politicians were making some small policy changes to try and address some of the problems. Fair housing plan, first time home buyer tax rebates etc. But these were really drops in the bucket, and I don’t know that any politicians were earnest sitting down and thinking to themselves that there was a real problem here and that things needed to change. Enter the pandemic, low interest rates, followed up quickly by a completely crazy housing market. What COIVD did, was shine the worlds biggest spotlight on housing and made the entire country realize how bad housing could really get if we let things go too far. All of a sudden, every level of government is talking about housing, all of a sudden we’re talking about educating trades workers again and doing something to fill in these gaps in our economy that have been growing for decades leading to the problems that we are now experiencing.

Interest Rates:

So what did the various levels of government do in order to try and reduce this crazy demand in housing that was brought on by COVID? Many things. The Bank of Canada (not technically the government, although still a government entity?), increase interest rates by 4.75% over the course of 1 year, the fastest rate increases in history, which made housing extremely unaffordable at current market prices. Almost instantly, a ton of demand dried up because, financially, it became a horrible deal to purchase a home. Real estate prices move in the downward direction a lot slower than they move in the upward direction, which meant that while the cost of owning a home climbed in lockstep with rate increases, prices did not fall at the same pace. Even with these high interest rates reducing the pool of potential buyers significantly, there’s just so little supply, that some people who really need a home, were still buying homes. We didn’t see a huge flood of inventory (until about a year or two later), because most people who were already in their homes might not have to renew their mortgage for another 3-5 years and don’t need to sell. Rates were a big hit to demand, but everyone was finally beginning to realize the gravity of the situation, and the Bank of Canada made it pretty clear that the high rates would eventually come down once they dealt with inflation. So while the oven was still hot, governments began to put other policies into place.

Foreign Buyers Tax:

In some provinces, mainly the larger ones, foreign investor taxes were put into place in order to reduce speculation on the Canadian housing market as an investment vehicle. Canada is a very stable country, so if you have money from another country that is less stable, why not just park it in a piece of land located in Canada, and as a side benefit watch the investment grow. Makes perfect sense from an outsider point of view. But what this means is that local “middle class” people have to compete with the global rich, who may want to send their children to school in Canada or for whatever other reason have an interest in real estate. There have been arguments made about whether of not the percentage of foreign investment in Canada was actually making a dent at all in the cost of housing and what even counts as foreign investment. But on the whole, if the goal of this policy was to reduce demand, a 25-30% tax on foreign investment is one way to accomplish that.

Foreign Buyers Ban:

Following this policy, but at the federal level, we had a foreign buyer BAN for 2 years starting Jan 1, 2023. Which has been extended for an additional 2 years until Jan 1, 2027, and who knows, maybe it’ll be extended again. What this means is that if you weren’t a citizen, or don’t have Permanent Residency (PR) status in Canada, you CANNOT buy real estate here, at all. So even if you were willing to pay the provincial tax of 25-30%, with the hopes of getting a rebate (within 4 years) once you have your PR, you can’t do that anymore. Again, if the goal of the policy is to reduce demand for housing. This will have likely accomplished that. However, a potential side effect of this policy is driving up rent prices, because there may be a situation where you have a highly skilled worker who comes here and is making really good money or may have the means to purchase a home, but now they are forced to rent. Which means more demand for rental housing from people who are barred from buying, even if they plan to make Canada their home long term. I would consider this a more artificial and temporary reduction in demand, because these skilled workers will probably buy after getting PR.

Less Immigration:

Wow what a great transition, let’s talk a bit more about PR shall we. Quite recently, the government has been walking back the number of people that can apply for PR and officially immigrate to Canada. This has made the process of becoming a Canadian citizen a lot more competitive, and if you combine this “reduce immigration” policy with the previous policy which only allows citizens or PR holders to purchase homes, you will see a notable reduction in demand for buying housing. There will literally be fewer people who are legally able to purchase homes in the coming years. That’s not technically correct since we’ll be increasing the number of Canadian’s every year while still not building enough. The pace of new entrants will still be outpacing construction. But at least with these new policies things will get worse slower than before.

Fewer Students:

One final thing on the demand front deals with students and rental housing. Students make up quite significant portion of the rental market. Prior to, and just after the pandemic. The government was allowing pretty much anyone who would be accepted by a college or university, to come to Canada and study. Which in theory is an ok idea since we hope those people will stay, get a good job, and contribute positively to the productivity of our economy (not to mention spend money while they are here). But this unregulated environment led to some bad actors taking advantage of the situation. In some cases students were getting scammed by private “career colleges” which sold a promise of a Canadian education, and frequently didn’t deliver even the basics. It was a bad look on Canada, and brutal on students that took a huge risk spending international student tuition to get an education in Canada.

Aside About Higher Ed:

Additionally, at some point down the line, higher education institutions, including the prestigious ones. Began to cater their “services”, to the international student audience. Why? Because international students pay 2-4x the tuition rates of domestic students and universities have been dealing with consistent budget cuts from the provincial government over the course of decades (god forbid we help to pay to educate our future workforce). As an aside, I feel very strongly that higher education should be almost free in Canada for locals (which means more government funding). It’s ok if you disagree, but I would ask that you think about the implications on young people when education leads to debt, we are handicapping them before they even begin working. Additionally, if it’s too expensive, some people end up forgoing education altogether. More highly structured education after high school isn’t always the right answer. But, I think fundamentally we can all agree that continuing to get educated is a good thing and more funding for higher education is a great way to do that.

After years of cuts, universities felt the need to increase international student enrollment in order to make up for the difference, and the funnel was effectively endless. Obviously, this all came to a head and some people began to tell their MPs about these issues, namely scam colleges, and shortly after we see a cap on student visas. What does this means for housing? Likely there will be less rental demand in major metro areas where higher education institutions are located.

Supply:

Ok, I think that wraps up the demand side of the equation. Excuse me while I go and watch the 4 Nations Faceoff Canada vs. USA game (Canada lost, dang). Supply is up next, and this is where things get really fascinating.

Rents at 18 Month Low:

A report from Urbanation, who do really good research on housing in the Greater Toronto Area explained in October 2024 that average rents, especially in large cities across Canada have been dropping. An even more recent report by BNN said that rents across Canada have hit an 18 month low in January declining 4.4 percent to $2100. Rents are still 5.2% higher than 2 years earlier. But this is still a welcome sign for many renters. So what’s going on here?

Flood of New Supply:

We’re in a very interesting moment in time right now. As mentioned in the demand section, we’ve done a pretty good across the board job of slowing demand. At the same time, we have a flood of new condo completions hitting the market, actually a record amount for 2024, 29,800 in the GTA. In a normal year there might be 20,000 completions, which means we saw a 50% increase in inventory hitting the market. Approximately half of these new condos were listed for rent, since many owners are reading the writing on the wall and can see that they won’t be able to sell at a good price. In fact they may not even get the price they paid out of the condo. The pandemic also slowed and delayed condo completions, and 2024 just happened to be the year of reckoning where everything hit the market all at once. Additionally, purpose built rental completions were 5,537 in 2024, which is 86% above the 10 year average. In 2023 completions were 5,779 units.

What This Moment Tell Us:

When you combine the twofold pressures of ton’s of supply for sale, a smaller pool of buyers than usual, more nationalistic policies, higher interest rates than usual, and a “stable” housing market which is moving very slowly in the downward direction. Many new condos and purpose built rentals hitting the market. Leading new condo owners to attempt to rent out their units because they are unable to sell them right now. We have accidentally created an amazing case study that proves the point that politicians, and economists have been shouting from the rooftops. How do we make housing more affordable? We build more. Simple. This moment in time proves that if we build more, and build more variety, and have a constant flow of new housing coming onto the market, it will very likely relieve the pressures that we’ve been seeing on the housing market and make housing more affordable. On top of managing demand, filling gaps in our economy with tradespeople, and building a variety of housing (we don’t need to exclusively build detached low-rise or 60 storey high-rise). If apartments almost become a dime a dozen, a commodity, instead of something you need to be making six figures even to afford a rental. That will put a lot of downward pressure on prices and people will be less feral when trying to bid on a home or a rental.

Quebec is Doing It Better:

We have a case study in Canada that we can look to, Montreal and Quebec. In general, Quebec has not seen the same problems with cost of housing that we have. The pandemic did make things worse for them as well. But I was wondering why they don’t seem to be having as severe of a crisis as we do in Ontario and BC. I learned that a few reasons for their ability to managing housing costs a bit better is because they have fewer exclusionary zoning by-laws, aka. They build a larger variety of housing. The home construction market in Montreal is able to adapt much quicker to changes in demand, they also don’t exclusively rely on high-rise condo’s to solve their supply problems. They build a variety of housing types, like 3-4 storey apartment buildings. That are able to be built quicker and meet demand quicker. Our supply is very inelastic in Ontario, which the supply in Quebec and Montreal tends to be more elastic preventing prices from going to crazy. They also prove the point that the fundamental issue surrounding housing is a simply supply and demand issue. We do have to look into all the layers that cause a supply problem, or lead to unusually high demand. But if you boil it down, we need to build a whole lot more, become a lot more creative, and as 2024 proved, the problem can get better. Thanks for reading, hope you found this interesting.

Keep Investing,

-Oliver

The Problem With Youth Unemployment in Canada

Economics: Canada’s GDP, and Employment:

There have been a lot of interesting developments happening in Canada related to employment that I think are worth discussing. I’m going to explain why Canada has one of the highest youth unemployment rates it has ever seen, why Canada’s GDP growth has actually been a negative for citizens, and how politics are influencing this issue and what people in power are starting to do about it.

Toronto and Ontario Lag Behind Canada:

The first topic I wanted to touch on is unemployment in Canada and more specifically in Ontario and Toronto where I now live. The unemployment rate in Toronto in November 2024 was sitting at 8.2% which is higher than Hamilton (6.7%), Kingston (5.8%), Ottawa (6.1%), St. Catherine’s (6.6%), and almost every other major city in Ontario except Windsor (8.5%). Toronto’s unemployment rate is comparable to Northern Ontario where work is notoriously hard to find (8.4%). The overall unemployment rate in Ontario was 7.2% which is higher than the national rate of 6.8%. Why is Ontario doing worse than the country as a whole and why is Toronto doing worse than the rest of the province? Let’s find out.

Overshooting Immigration Targets:

Unemployment is the symptom, not the cause. In order to find the cause we need to understand how unemployment works in the first place, and this is generally just a case of supply and demand. But there are other factors at play, like interest rates, immigration and migration, investment etc. As we have all been made aware by now, Canada overshot it’s immigration and migration numbers by a significant amount in the past couple years and the government is beginning to try and put more restrictions on people coming into the country. Generally speaking, Canada has always been friendly to immigration, especially people who are highly skilled workers and are able to contribute positively or fill needs in our economy. It has been stated many times over that the only way for Canada to maintain it’s pension plans and continue growing GDP and productivity is through immigration. If immigration is such a good thing, why have we decided to cut it down? Well part of the reason is that we have nowhere to put people, housing has become such a large issue and pain point, and renting or buying almost anywhere in the country is becoming extremely unaffordable. People will come here, and expect to find a reasonable home and realize that a huge portion of their paycheque is going towards their rent or mortgage. This doesn’t explain unemployment, but it does help explain some issues we have with our economy as a whole.

Highest Household Debt in G7 Curbs Spending:

Another factor in our problematic economy is that Canada has the highest household debt to income ratio in the G7. Meaning that people in Canada are extremely overleveraged on their homes and rent payments. This affects the economy in ways that people may not understand. Traditionally the people who spend the most money tend to be middle class, and spending money is what stimulates the economy and leads to growth and expansion. What has happened over the past few years with the skyrocketing costs of housing, the expensive mortgages that people are renewing into, and general high inflation. Is that people do not have excess money to spend, and consumer confidence is quite low.

Employers Pull Back Investment:

If people are not spending, there is no reason for companies to make investments in their workforces and R&D new products when there is no demand for those things, and in many cases shrinking demand. We now find ourselves in a situation where our GDP per capita (per person) has actually gone down at the fastest rate in the G7. This is a much more accurate measure of quality-of-life changes, as compared to overall GDP growth. Part of the reason per capita is down is because we’ve let in so many people (over a million in 1 year). The overall GDP has gone up compared to a year ago, but per person has gone down. Without all these extra people boosting our numbers we’d be in a technical recession. The way that falling GDP per capita manifests in people’s real lives is the realization that their money doesn’t go as far as it once did and struggling to afford and adjust to fewer things, fewer luxuries, fewer benefits that come with a growing economy. Life has become more difficult and paying bills has become more challenging in the past couple years for the grand majority of Canadians. The average money that Canada produces, per person in the country, has gone down, there is literally less to go around. But the economic headlines don’t usually focus on GDP per capita, they focus on GDP and proudly promote the fact that our economy is (technically) growing.

Newcomer Credentials Not Recognized:

Because of all these factors: high interest rates, high levels of household debt, low business investment, declining GDP per capita, and millions of people coming to Canada, we are suffering an unemployment problem that is getting progressively worse. These problems are also making it even more challenging for all the people and students who come here. I don’t believe that people should expect handouts, but by the same token I’m not sure that it’s fair that we are telling people to come here, and then they’re met with the reality that there’s just no work for them or their credentials aren’t recognized or a million other hurdles are put in their way to succeed. Work is becoming harder and harder to find due to the above, this leads to strains on public services, food banks, and more. By allowing the sheer number of people to come into the country that we did, we are effectively draining our own resources at breakneck speed. Stack on top of this our housing construction issue which is a whole other topic for a whole other blog, and we’re just squeezing people for everything they have. High cost of housing, poor employment, the picture is bleak. A lot of the economic factors I’ve mentioned are leading to the cost of home construction to become un-feasible for builders, and this will lead to a renewed shortage of housing about 3-5 years from now, which is really not what we need added to the pile of problems.

Historically High Youth Unemployment:

Let’s discuss youth unemployment, I’ve been reading some scary things about the 15-24 age group. The core age group 25-54 is currently experiencing above long run average employment levels, the youth age group is not faring nearly as well. As of last year, employment was at somewhat normal levels for Ontario youth, hovering around 11%. But in the latter half of 2024 it has jumped to around 17% and is getting worse. This is problematic because getting a job is important to development for a lot of young people. Your first crappy customer service job motivates you to find a better job, internships lead to future full time roles, and you learn important life skills and how to work with others. These employment numbers getting worse are not only bad right now, but will be bad for the future workforce, youth unemployment is a crisis. France has declared youth unemployment a national crisis, and their numbers are better than ours, what does that say about us? These numbers are also directly impacting a lot of university graduates because it points to the fact that companies are hiring fewer and fewer new grads in an already extremely challenging environment to find work.

University Graduates Struggling to Find Work, Hiring Freezes:

This data backs up what I’ve been hearing anecdotally. I graduated from Engineering in 2023 and I’ve been talking to others who graduated from school around the same time I did. I’ve heard stories of people searching for work for over 7 months to a year and a half AFTER graduation to find work (many still looking). A client of mine that I spoke to a month ago who works for a materials engineering company is currently in a hiring freeze and knows of many other companies who are doing the same. This is as of November 2024. Every engineering graduate I’ve recently spoken to agrees with me when I make the comment, “I wasn’t aware when I started school, that part of the gig would be moving to the US.” Not just to find a job that pays well, but to find any job AT ALL! You suffer through years of engineering just to continue to suffer for another year or more to find a Canadian engineering job, it’s extremely disheartening and I don’t blame people for feeling disenfranchised with Canada or their expensive educations because of it. I can think of a greater number of people from my engineering cohort who are working in the US than those who are working in Canada. The ones who are working in Canada are only doing so because they are international students and have no other choice (or worked their butts off applying), but would much prefer work in the US, and likely will once they are Canadian citizens. I don’t know how else to say this, but we simply don’t have enough jobs in Canada and Ontario to keep people from leaving, and the US benefits from all these people we’ve spent (partial) taxpayer money educating.

Employers Hiring for Experience:

Another relevant point here is that as companies are cutting costs, tightening their belts, and possibly laying off highly qualified workers, why bother hiring a new grad you have to train from scratch where there is a pool of much more experienced, more qualified people for you to choose from. This contributes to the bleak outlook for youth employment. The numbers back this up because employment of core workers is steady and rising, while it is falling for youth. Diverging a bit from the data again, I read recently a comment from a Canadian online forum that you used to be able to just walk into pretty much any retail store and ask for a job and you’d be hired in a jiffy. But even these basic jobs are much harder to come by and staffed frequently by overqualified workers, or workers who aren’t getting paid properly and are becoming harder to find.

Part-Time Work Replacing Full-Time Work:

Another concerning fact is that we are losing full-time jobs almost at the same rate that we are gaining part-time jobs. Our employment situation is actually much worse than the numbers make it seem, full-time jobs are being replaced by part time-jobs and gig work. This is a problem and underscores that quality of life has likely declined for a significant portion of the population. Full-time stable employment is becoming a thing of the past for many people and they are replacing it with one or more part-time jobs. Along the same vein is underemployment, Canada is notorious for this. Everyone has a story of when they discovered that their Uber driver was a doctor in their home country. I don’t have any issue with doctors having to go through recertification and a couple years of training to get up to speed on how we do things here. But there are no spots available for them in residency programs and yet we have a huge shortage of family doctors! What are we doing here?

“98% of Graduates Are Employed”… at McDonalds:

I feel similarly when I learn a recent university graduate is working at McDonalds just like they were in high school. The only difference is that they have a 4-year university degree and are $30,000 more in debt. The situation here is quite frankly bizarre. This reminds of an ad that I would often see in Hamilton that made me laugh while I was on the bus to and from McMaster University. Brock University was advertising that “98% of [it’s] graduates were employed within 2 years of graduation.” No mention of whether those graduates were employed in their field or a related field or if they were using their degree at all for that employment. So I would always joke “yeah and 50% of them are working at McDonalds or underemployed.” It’s not impressive at all that after 2 years out from school you might finally decide to move out of your parents basement and start working literally any job to pay your students loans back. I knew it was bad 5 years ago, and it’s only gotten worse thanks to all these knock on effects of the pandemic and other world events.

Why Toronto is the Epicenter:

So back to the question I posed at the top. Why is the employment rate worse in Ontario and Toronto than the rest of the country? The answer lies mainly in the number of people that choose to come to the province. Ontario is the largest province, has the most schools, and brings in the most people. But we also don’t have as diverse of an economy as the US. We are not the profit center of Canada, that honour goes to our silicon valley, Alberta and their oil. We don’t have the most profitable enterprises in the country, yet we see the most people coming here. Demand to live and work in Ontario and Toronto is much higher than supply, therefore we see the phenomenon’s I have illustrated. This supply-demand imbalance is also somewhat of a contributing factor to all the issues I posed above related to youth unemployment, people leaving Canada, and our false GDP problem, it also underscores the importance of the governments of Toronto and Ontario taking these issues seriously and trying to identify solutions to all these problems. Much of the problem does still lie with the Federal government’s regulations and Bank of Canada policy. But employment, especially for youth, is something I believe needs to be addressed by all levels of government on top of what they’re already doing with housing and population.

Keep working hard,

-Oliver