Hotter-than-expected labour market casts doubt on January BoC cut
Canada’s labour market posted a better-than-expected performance in December, adding 91,000 jobs as unemployment also ticked slightly lower and called a potential Bank of Canada interest rate cut this month into question.
Statistics Canada said on Friday that the jobless rate fell by 0.1% last month, coming in at 6.7%, as 40,000 jobs added in the public sector helped spur an overall jump in employment.
The number of Canadians employed full-time was up by 56,000, according to StatCan, and last month marked the first time in exactly two years that the employment rate had increased.
In the private sector, 27,000 jobs were added, while self-employment increased for the first time since February (by 24,000). The education, transportation and finance sectors accounted for the largest employment gains.
The report generally suggested a “sturdy” labour market, Bank of Montreal (BMO) chief economist Doug Porter said, and added credence to the belief that the economy began to pick up towards the end of 2024.
He said an expected dip in average hourly wages would come as welcome news for the Bank of Canada, marking the slowest pace of wage growth since May 2022, but highlighted that StatCan’s “notoriously volatile” Labour Force Survey meant it was premature to set too much stall on a single report.
Signs of a robust jobs market, Porter added, will “prompt some meaningful doubt” on a possible central bank rate cut later this month. “The fact that the Fed looks to move to the sidelines for a spell, and the Canadian dollar is struggling mightily, may also chill the BoC for now,” he wrote.
Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen, meanwhile, said the labour market figures for December were “clearly firmer than expected” but said the Bank of Canada will still probably need to cut the overnight rate “to slightly ‘stimulative’ levels this year.”
Source CMP
By Fergal McAlinden