Canada jobs numbers spike, but April inflation may delay rate cut: economists

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Canada added 90,000 jobs to the national economy in April, according to the latest figures from Statistics Canada, but April’s inflation numbers may cause the Bank of Canada to hold a June rate cut.

In its release, Statistics Canada said over half of the job gains, around 50,000 in all, were in part-time employment, with service-sector jobs leading the charge. Private-sector employers, who’ve remained relatively sluggish in hiring, drove most of the new jobs in April.

Nonetheless, the unemployment rate remained unchanged at 6.1%, following a slight increase in March. Across all of Canada, Statistics Canada estimates 1.3 million Canadians were unemployed as of April.

The surge in new jobs was higher than most economists expected, with National Bank of Canada economists Matthieu Arsenau and Alexandra Ducharme describing it as the largest employment jump in 15 months.

However, they pointed out that Canada also saw some significant demographics changes. The country added 112,000 people aged 15 and older, they said in a research note, the second-highest increase on record.

“At this current rate of population growth, the labour market needs to generate 60,000 jobs to maintain the employment rate,” Arsenau and Ducharme wrote on May 10. “By this criterion, job creation in April was good, but no more.”

It also isn’t a rosy jobs report for everyone. Toronto’s overall unemployment rate hit nearly 8% year-over-year, and unemployment rates for workers aged 15 to 24 are even worse at 12.8% year-over-year.

The big question for economists, and homebuyers, is whether these statistics are enough for the Bank of Canada to justify cutting rates.

Nathan Janzen, assistant chief economist at RBC Economics, pointed out that Canada’s unemployment rate has risen higher than other advanced economies and wage growth is slowing down, but the BoC might hold off on drastic action.

“Labour markets have softened enough to lower inflation risks going forward and justify a pivot to interest rate cuts from the Bank of Canada,” he wrote, “but the bottom also still hasn’t fallen out in a way that is forcing the central bank to act urgently.”

Most economists agree that the BOC will probably cut rates in either June or July. But a lot rides on April inflation data. If it remains elevated, the Bank of Canada may wait even longer. In the U.S., where unemployment rates are lower than Canada, the Federal Reserve is hinting rate cuts may not arrive until the fall of 2024 at the very earliest.

“We think these indicators should prompt the central bank to adopt a less restrictive monetary policy stance at its next meeting,” wrote Marc Desormeaux, principal economist at Desjardins, in a research note, “though the April 2024 inflation data set for release in two weeks will be key to solidifying that call.”

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