Latest report should leave central bank comfortable with recent decision to hold for second time
October’s jobs report will leave the Bank of Canada more “comfortable” with its decision to hold interest rates at 5 per cent, economists say.
Statistics Canada’s employment report on Nov. 3 showed the jobless rate jumped to 5.7 per cent from 5.5 per cent, higher than expected. The economy generated a net gain of 17,500 jobs, falling short of estimates of 25,000.
Average hourly wages, which eased to a 4.8 per cent increase year over year from five per cent in September, will also be on the central bank’s radar.
These numbers are important because policy makers believe a tight and overheated jobs market and rising wages stoke demand and inflation.
When it held rates on Oct. 25, the central bank said, “Governing Council wants to see downward momentum in core inflation, and continues to be focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour.”
Simon Harvey, head of currency analysis at Monex Europe and Canada, said the deceleration in wage growth “should translate into a continued decline in the BoC’s measures of core inflation.”
Here’s what economists say about the latest jobs numbers and what they mean for the Bank of Canada and interest rates.
“The fact that the population again outpaced job creation led the unemployment rate to rise. In the current context, where the Bank of Canada is trying to rein in inflation, the surge in headcount gains risks boosting demand for goods and services and inflaming price pressures. However, over time, it should help to continue to increase the supply of available workers as well as reduce labour market tightness and potential wage-push inflation.
“We remain of the view that the Bank of Canada’s next move will be a cut in the second quarter of 2024. The still-tight labour market is showing signs of easing, and Canadian consumers and businesses still haven’t felt the full effects of prior borrowing cost increases. We continue to anticipate that the economy will enter a mild recession in the coming quarters. Of course, upcoming data on inflation will be key, although this too is showing signs of moving in the right direction.”
“Weakness in economic activity appears to be slowly filtering through to a softer labour market, with job growth slightly weaker and the unemployment rate marginally higher than expected in October . . . . Overall, today’s report is further evidence that more rate hikes are not necessary to cool the economy, and combined with a weaker U.S. figure as well could see market expectations for interest rate cuts brought forward earlier into 2024.”
“The more modest rise in employment and essentially unchanged hours worked in October suggest that labour demand is easing gradually. And with the unemployment rate rising again thanks to strong labour supply growth, the Bank of Canada should feel more confident that wage pressures will continue to ease.”
“When the Bank of Canada decided to hold rates at five per cent last week, it did so because of a notable slowing in economic momentum. While this has been apparent in reduced consumer spending and a weakening housing market, the labour market left the BoC wanting more. But, given the rise in the unemployment rate and continued weakening in the underlying details, today’s report is likely to make the BoC feel more comfortable about its decision to hold. Looking forward, we are expecting this employment trend to continue, while high rates and persistent inflation make the case for the BoC to remain on hold in December.”
“With some progress made in October to create some slack in the labour market and slower wage growth, the likelihood of further rate hikes in the near future has diminished. Our view remains that the policy rate has likely peaked and that the Bank of Canada will stay on the sideline and watch previous rate increases work their way through the economic system and reduce inflationary pressures.”
“The BoC will still be cautious about easing off on the monetary policy brakes while inflation is still high. But signs of softening in labour markets should reinforce the decision to pause rate hikes for now and increase the odds that the next rate change will (eventually) be a cut. Our own base-case assumes the overnight rate will begin to move gradually lower in the second half of next year.”
“The re-emergence of slack in the labour market is … starting to weigh on wage growth, which fell from 5.2 per cent to five per cent year over year (for permanent employees). This should translate into a continued decline in the BoC’s measures of core inflation, which if confirmed would support our view that the BoC has now concluded its hiking cycle and will now rely on below potential growth in guiding inflation back to target. This moves the market’s spotlight onto when the next change in policy will occur. In this case, that is an interest rate cut. In our view, the BoC is unlikely to ease before Q2 next year, but there is a risk that if growth conditions crater and lead to a more substantive unwind in the labour market, thus weighing on wage growth and the consumption outlook for 2024, that the BoC is forced to ease policy back to neutral as early as Q1.”
“Combined with GDP data earlier this week, October’s job report show that the Bank of Canada’s previous rate hikes are effectively cooling the economy, and no further rate hike would be required.”
“Extremely restrictive monetary policy has dampened demand to such an extent that companies no longer perceive a labour shortage, if various surveys are to be believed. This is reflected in private sector hiring, which has stagnated in recent months. The details of the report are no more reassuring, with the public sector being the only segment to generate jobs in October….
“In our view, this morning’s report confirms that the Bank of Canada was right to keep rates unchanged at its last decision, and that even this summer’s rate hikes were perhaps unnecessary. The rate hikes implemented since the beginning of the monetary tightening have yet to have their full effect on the economy, suggesting a bumpy road ahead.”
Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.
The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.
Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.
The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.
Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”
“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.
“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”
Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.
The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.
It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.
Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.
It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.
“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.
Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.
The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.
Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.
The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.
“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.
Asked how long that environment could last, he said that’s out of Telus’ hands.
“What I can control, though, is how we go to market and how we lead with our products,” he said.
“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”
Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.
On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.
That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.
Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”
“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.
“We will continue to monitor developments and will take further action if our codes are not being followed.”
French said any initiative to boost transparency is a step in the right direction.
“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.
“I think everyone looking in the mirror would say there’s room for improvement.”
This report by The Canadian Press was first published Nov. 8, 2024.
Companies in this story: (TSX:T)
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
Companies in this story: (TSX:TRP)
The Canadian Press. All rights reserved.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
Companies in this story: (TSX:BCE)
The Canadian Press. All rights reserved.
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