Statistics Canada released what TD Bank senior economist James Orlando called a “blowout jobs report” in a note to clients Friday..The StatsCan report says the labour force increased by 153,000 people in January, while the unemployment rate held at 5%..The agency said job gains came across many sectors, with wholesale and retail trade experiencing the largest gains to employment. Full-time work grew by 121,000 positions..An RBC report broke out the job increases over the private sector (up 115,000 jobs) and public sector (up 38,000)..RBC found notable gains in the services-producing sector (up 125,000), wholesale and retail trade (up 59,000), health care and social assistance (up 40,000) and educational services (up 18,000)..Transportation and warehousing were one of the few sectors where employment pulled back (down 17,000)..Gains were strongest in Ontario, with 63,000 jobs added, followed by Quebec 47,000 jobs added and Alberta, 21,000 jobs added..Canada has added more than over 800,000 jobs since the start of the pandemic – 326,000 of those since September..Two-thirds of job gains were driven by prime-age workers (those 25 to 54), with labour force participation in this group at a record high of 88.9% in January..Orlando said that the strength of the jobs figures gives momentum to consumer spending and the overall economy to start the year..The RBC report says the numbers conflict with recent Bank of Canada Survey data. .“The Bank of Canada Business Outlook Survey indicated business plans to hire staff have fallen alongside wage growth, which conflicts with the January Labour Force Survey data,” says RBC. “Year-over-year wage growth has fallen to 4.5%, but hiring continues at a rapid pace and the unemployment rate held steady at a near record low 5%.”.RBC believes the rate of job growth seen in January cannot be sustained..“It remains our view labour markets will not remain this tight over the near term. The delayed impact of the Bank of Canada’s 425 basis points of hikes is still gradually flowing through to household and business debt payments and will ultimately erode demand, pushing unemployment higher through the end of the year,” says RBC. .“Moreover, with record high participation and fewer unemployed Canadians to fill jobs, job creation is not sustainable at the current pace.” .“The Bank of Canada has indicated that rates will be held steady unless there is sufficient evidence that more restrictive monetary policy is needed. While the bank will likely look past one strong jobs report, if additional reports prove to be stronger than expected, this would pose upside risk to the current terminal rate forecast of 4.5%.”.Meanwhile, wages were up 4.5% on a year-over-year basis..The labour force survey outpaced expectations from RBC, which expected growth of 5,000 jobs last month..The Canadian economy has been on an upward trend with employment since September, adding a total of 326,000 jobs..That’s despite forecasters anticipating higher interest rates will slow the economy significantly this year and weigh on employment..He said the strength of the jobs figures gives momentum to consumer spending and the overall economy to start the year..CIBC Senior Economist Andrew Grantham pointed to the uptick in hours worked in January as a sign of strength in the Canadian economy..This figure “suggests that the economy certainly isn’t on the verge of recession,” he wrote in a note to clients on Friday..The latest reading of employment levels comes as the Bank of Canada takes a conditional pause from hiking its key interest rate further as it assesses how the economy is responding to higher rates..The Bank of Canada says the tight labour market is a sign of an overheated economy and needs to ease in order for the country’s annual inflation rate to come down..While Orlando said the January jobs report is likely to “raise eyebrows” at the central bank, he does not expect the single economic release to deter the Bank from its planned pause..The Bank of Canada said it will need an “accumulation of evidence” that inflation is not following its forecast before it would raise rates further..Grantham agreed with Orlando’s take, but said the strong jobs print will likely still see markets price in a greater probability of more interest rate hikes to come.
