The personal finance number to watch now is the unemployment rate.
Stocks, the dollar and oil prices are hard to look away from, but there's nothing new there. All are negative, as they have been since the year began. The jobless rate has been comparatively encouraging lately, but the Bank of Canada announcement on Wednesday gives us reason to wonder if that can last.
The central bank didn't lower its benchmark rate, which is good news in a variety of ways. Lower rates would hurt already suffering savers, add to the downward pressure on the dollar and probably encourage some people to make borrowing decisions they'd regret later. But the bank did cut its economic growth forecast, a shift that should influence your thinking about spending and borrowing.
A low dollar is supposed to help the economy by making our exports cheaper in the United States, where growth is stronger. But that could take years to fully play out. Meantime, there's going to be increasing stress on a job market that has held up rather well until now, if you look beyond the resource sector.
In December, for example, the overall unemployment rate held at 7.1 per cent. But for the full year, more than half of the 158,000 jobs created were in the category of self-employment. We've been doing OK in quantity in the job market, but not so much on quality.
If the economy slows even more, expect a more negative effect on jobs and incomes. You you could lose hours or be converted from full-time to temporary work. Existing contractors may find more of a lag between gigs. Layoffs are also a risk – a quick search for recent mentions of layoffs in our Globe and Mail database found:
- 90 job cuts at the Postmedia newspaper chain.
- Layoffs of 14,500 low-income earners in the resource sector since September 2014 and 3,095 of the highest paid workers as well.
- The loss of 77 jobs at the head office of the women's clothing chain Reitman's Canada.
- A mine closure in New Brunswick that will affect more than 400 jobs at Potash Corp.
Have an emergency fund to support your income needs if you lose a job or some income. Just as importantly, don't make big spending decisions without first looking at the economy through the Bank of Canada's eyes. It won't be easy. For years, we've had declining interest rates without many of us feeling any economic pain. That's why the housing market has soared and why sales of new cars and trucks set a third consecutive annual record last year.
Now, there's a risk that we'll see economic conditions that match our low interest rates. It's already happening in parts of the country where oil and mining are big business.
Paying down debt is another way to prepare for a slower economy. Nothing limits your financial flexibility like having to shovel out hundreds of dollars every month to cover the payments on a line of credit or loan.
Even without a new rate cut, borrowing costs remain low enough to be a strong incentive to borrow. Unless you assess your job as being safe, don't.