First the good news: Canada’s unemployment rate fell for the first time in January since 2022.The bad news? Ditto.According to Statistics Canada, the country added 37,000 jobs last month, pushing unemployment down to 5.7%, the first drop since December, 2022. The Bank of Canada (the bank) had been expecting a more modest gain of about 10,000 jobs, which would have actually pushed unemployment up to 5.9%..Alberta’s unemployment rate in January was 6.2%, relatively flat from 6.3% in December and representing a gain of more than 10,000 jobs — a quarter of all produced nationally — most of which came from full-time employment.Though it seems counterintuitive, lower unemployment translates into higher wage growth, which in turn means higher interest rates as the Bank of Canada maintains an almost militant stance on price growth and overall inflation.If more people have jobs and money to spend — ostensibly a good thing — it also means more people are spending money, on a limited pool of things.The bank's Governor Tiff Macklem has continued to insist that average annual wage hikes on the order of 5% is inconsistent with meeting inflation goals without associated gains in productivity that have been masked by higher immigration, mostly..“A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts,”BMO Chief Economist Douglas Porter.But in that regard, StatsCan reported that real gross domestic product rose 0.2% in November which is the first gain since May of 2023, thanks to strength in goods-producing sectors as opposed to services.That said, continued high interest rates are meant to put the brakes on the economy — not stoke it.The central bank has consistently said it is looking for signs that the economy is slowing and demand is easing to give it confidence that inflation will continue to trend back down to its 2% target.Instead, early numbers show economic growth actually picked up pace in December, although by how much won’t be known until February..BMO’s chief economist and managing director of economics Douglas Porter wrote Friday the jobs report shows there are no obvious signs of economic stress that would prompt Macklem to change his mind.“A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts,” he wrote. “The Bank of Canada is likely to view this report as further reason for a patient policy stance.”Likewise, Friday’s results caused CIBC to reel in its rate-cut forecast for 2024, and now expects 1.25% worth of rate cuts by the end of the year as opposed to 1.5% previously.“Today’s data confirm that the bank won’t be in a rush to cut interest rates, and we maintain our expectation for a first move in June,” wrote CIBC economist Andrew Grantham. “Given indications from today’s data and previously released GDP figures that the Canadian economy is in somewhat better shape than previously expected, we now forecast 25 basis points fewer cuts by the end of the year.”
First the good news: Canada’s unemployment rate fell for the first time in January since 2022.The bad news? Ditto.According to Statistics Canada, the country added 37,000 jobs last month, pushing unemployment down to 5.7%, the first drop since December, 2022. The Bank of Canada (the bank) had been expecting a more modest gain of about 10,000 jobs, which would have actually pushed unemployment up to 5.9%..Alberta’s unemployment rate in January was 6.2%, relatively flat from 6.3% in December and representing a gain of more than 10,000 jobs — a quarter of all produced nationally — most of which came from full-time employment.Though it seems counterintuitive, lower unemployment translates into higher wage growth, which in turn means higher interest rates as the Bank of Canada maintains an almost militant stance on price growth and overall inflation.If more people have jobs and money to spend — ostensibly a good thing — it also means more people are spending money, on a limited pool of things.The bank's Governor Tiff Macklem has continued to insist that average annual wage hikes on the order of 5% is inconsistent with meeting inflation goals without associated gains in productivity that have been masked by higher immigration, mostly..“A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts,”BMO Chief Economist Douglas Porter.But in that regard, StatsCan reported that real gross domestic product rose 0.2% in November which is the first gain since May of 2023, thanks to strength in goods-producing sectors as opposed to services.That said, continued high interest rates are meant to put the brakes on the economy — not stoke it.The central bank has consistently said it is looking for signs that the economy is slowing and demand is easing to give it confidence that inflation will continue to trend back down to its 2% target.Instead, early numbers show economic growth actually picked up pace in December, although by how much won’t be known until February..BMO’s chief economist and managing director of economics Douglas Porter wrote Friday the jobs report shows there are no obvious signs of economic stress that would prompt Macklem to change his mind.“A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts,” he wrote. “The Bank of Canada is likely to view this report as further reason for a patient policy stance.”Likewise, Friday’s results caused CIBC to reel in its rate-cut forecast for 2024, and now expects 1.25% worth of rate cuts by the end of the year as opposed to 1.5% previously.“Today’s data confirm that the bank won’t be in a rush to cut interest rates, and we maintain our expectation for a first move in June,” wrote CIBC economist Andrew Grantham. “Given indications from today’s data and previously released GDP figures that the Canadian economy is in somewhat better shape than previously expected, we now forecast 25 basis points fewer cuts by the end of the year.”
