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More employment means more real estate demand, and housing crash-related anxiety could quickly disappear if the Canadian economy keeps producing jobs growth data like Friday's.
The connection between job growth and housing prices is subjectively obvious: newly employed people are more able to afford homes, and are likely desperate to move out of their parents' basement.
Statistically it can be shown a bunch of ways. The first chart shows the year over year change in housing prices and the year over year change in the unemployment rate. The correlation is high at 0.73.
Another way to measure employment's effects on housing prices is comparing monthly new job creation (smoothed with six month moving average on our scatter chart) with the Teranet National Bank Housing Price Index. The correlation is even higher at 0.79 (r-squared 0.63). Again, more new jobs correspond with higher domestic housing prices.
The falling level of activity in the Canadian residential housing market has created legitimate fears that housing prices are about to head off a cliff. The OECD has piled on, suggesting that Canadian housing market is among the top three most expensive, and extended, in the world.
Friday's job numbers suggest otherwise. At the very least, continued stronger employment would provide enough support to housing demand to avert the worst case scenario of 2008-style American mortgage mayhem. We're not out of the woods yet – the housing market could still soften – but the employment news should have most homeowners breathing easier.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights , and follow Scott on Twitter at @SBarlow_ROB .
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Scott Barlow