Experts believe Canada’s surprisingly weak jobs data for March indicates that interest rate cuts are on the horizon.
On Friday, Statistics Canada reported Canada’s unemployment rate jumped up to 6.1 per cent in March, as the country lost 2,200 jobs after small increases in previous months.
Tu Nguyen, economist with tax and consultancy firm RSM Canada, said the data is a “sign that rate cuts are coming.”
“All the data point to an imminent rate cut: the unemployment rate surpassed six per cent for the first time in over two years, inflation excluding shelter and inflation excluding mortgage interest payments fall to target, and the economy have flatlined for months on end,” Nguyen wrote in a news release on Friday.
“We expect the (central) bank to hold in April and begin cutting in June as they want another couple of months to solidify the progress made in restoring price stability. If the bank waits any longer, they would be repeating the mistake made in 2022 of waiting too long, and thus stifling the recovery.”
Lauren Saidel-Baker, an economist with ITR Economics, called Canada’s jobs numbers a “big surprise.”
“I did not expect job losses in Canada now for quite a while,” she told BNN Bloomberg in a television interview on Friday. “We have seen population growth in Canada exceed the rate of job creation, so that has been moving to cool the labour market, to ease some of that tightness in Canada.”
“Outright losses in jobs, that I'm a little bit surprised to see.”
Even with fewer jobs, wage growth for March grew sharply, with hourly wages up 5.1 per cent compared to a year ago.
Saidel-Baker is concerned wage growth will get Canada’s inflation rate high.
“They are certainly the stickier components of inflation right now,” she said. “We see overall producer prices starting to ease commodity prices have flattened a lot. Even with some of these geopolitical tensions, shipping costs have come down, but wages are really that last sticky component that are keeping costs higher.”
Nguyen anticipates Canada’s labour market will stall for the next several months.
“The reality is employers are squeezed by high interest rates and not hiring,” she said. “This is especially challenging for those entering the labour force for the first time as youth unemployment rose to the highest since 2016 and many grow discouraged and stop looking for work altogether.”
“Businesses expect wage growth to slow in the coming months to match the lukewarm labour demand, and hiring might pick up in the latter half of the year only after rate cuts begin.”
The next Bank of Canada interest rate announcement is slated for April 10, with the next one coming on June 5.
With files from The Canadian Press