Today, Statistics Canada released employment data for April, and a rate cut in June may not be achieved. Economists predict that the central bank's first interest rate cut may not be seen until July.
Employment growth exceeded expectations
In April, Canada added 90,000 jobs, well above economists' forecast of 20,000 new jobs.
Federal agencies attribute the job growth to an increase in part-time jobs, which have increased by more than 50,000. In addition, more jobs have been added in the professional field, in the scientific and technical services sector.
Separately, employment in people aged 15 to 24 increased by 40,000 in April, the first monthly increase in this group since December 2022.
The unemployment rate has not fallen
However, the unemployment rate was unchanged from the previous month at 6.1% – which is higher than a year ago.
Andrew Grantham, chief economist at CIBC, believes that "these figures indicate strong job growth, and population growth is equally strong – which explains why the unemployment rate has remained stable despite higher job growth".
Statistics Canada said employment in the private sector increased in April. Grantham noted that most of the job growth over the past year has been driven by the public sector, with April's data showing an "encouraging change".
The country's overall employment rate (as a percentage of the employed population) also remained at 61.4%, the first rebound after six consecutive months of decline. The Bureau of Statistics noted that employment fell by nearly 1 percent in the same period this year compared to April last year, as Canada's population growth was higher than job growth.
Average hourly earnings continue to rise
In April, average hourly earnings increased, but at a slower pace than month-on-month. Average hourly earnings rose to $34.95 in April, an increase of 4.7% compared to April 2023. However, this is slightly lower than the 5.1% increase in March this year.
The central bank may delay cutting interest rates
Undoubtedly, the Bank of Canada will consider this report to determine whether it will change interest rates next month. Here's what economists have to say about the latest jobs data and the report's possible impact on central banks.
Capital Economics：7月而非6月
Capital Economics said the latest jobs data gave the central bank breathing room on when to cut rates, with economists seeing a greater chance of a rate cut in July than in June.
Stephen Brown, deputy chief North American economist at Capital Economics, said in a statement: "Overall, the resilience of the labor market has given central banks more time to wait to ensure that the recent series of favorable CPI (Consumer Price Index) data will continue." ”
The central bank's next interest rate decision will be announced on June 5, but there will be three CPI reports before the central bank's July 24 meeting.
"This makes it more likely that the central bank will wait until the end of July meeting before considering a rate cut," Brown said.
Desjardins: Stick to the June rate cut
Royce Mendes, head of macro strategy at Deloitte, said in a statement: "We insist that the central bank will cut interest rates in June. ”
Mendes said the labour market was showing "idleness" despite the striking job growth, as Canada's population aged 15 and over increased by 112,000 in April, outpacing job gains.
The population grew by 3.3 percent compared to the same period last year, while employment for people aged 15 and over increased by 1.9 percent, the statistics office said.
"We are not sure that this report will materially change the central bank's assessment of the labor market," Mendes said.
Still, the inflation report released on May 21 is crucial for the central bank as the jobs data rebounds, he said.
RBC: Stick to the June rate cut
"The central bank doesn't have enough reason to cut interest rates immediately," Nathan Janzen, assistant chief economist at RBC, said in a statement.
"The labor market is already weak enough to reduce the risk of future inflation, and the central bank has a reason to cut interest rates."
"Our assumption is that the central bank will have the ability to lower its policy rate in June," Janzen said, noting that signs of weakness in the labor market are strengthening.
For example, wage growth slowed from 5.1 percent to 4.7 percent, while labor market growth continued to lag behind the growth of Canada's population. There's also evidence that people are looking for work for a longer period of time, Janzen said.
But April's inflation report must provide consistent evidence of an easing of price pressures, the economist said.
Alberta Central：6月可能降息
The employment rebound in April is unlikely to have much of an impact on the central bank, said Charles St-Arnaud, chief economist at the Central Bank of Alberta.
St-Arnaud, who still predicts that the central bank will cut interest rates at its June meeting, said the central bank's focus is entirely on inflation.
Although inflation rose to 2.9% in March from 2.8% in February, the number of goods and services that rose in price was still decreasing, while core inflation was "falling back below 3%" – within the central bank's inflation target.
He said this meant that a rate cut in June was still on the table. One thing that might make the central bank change its mind is the "positive 'surprise' of inflation".
BMO: "A dilemma in determining interest rates in June"
BMO's Doug Porter's analysis to clients is that "job growth will make central banks "hesitate" to cut interest rates – and the June rate cut could be a "wobbly" issue.
Porter said April's employment data showed that "the economy is clearly not collapsing."
The increase in total working hours could lead to higher-than-expected GDP in the second quarter. In addition, the private sector recorded a "substantial" 50,000 new jobs.
On the downside, the unemployment rate is up from a year earlier, while the number of unemployed is up 24% year-on-year – making the market a little hesitant about the future path of interest rates.
"The market is now starting to see the June rate decision as a dilemma again," Porter said, "and the April CPI report will be crucial for the May 21 CPI report." ”