Bank of Canada faces Oct. 28 decision after job losses

The Bank of Canada is widely expected to leave its key interest rate at 2.25 per cent when it announces its next decision on Oct. 28, after Statistics Canada reported two straight months of job losses.

The agency said Friday the economy shed 68,000 jobs in September, a drop of 0.3 per cent, and the unemployment rate rose to 6.5 per cent from 6.4 per cent. Economists had expected a small gain.

August employment fell by about 42,000, according to figures cited by Global News and Money.ca. Together, the two months have wiped out more than half of the 181,000 jobs added from April to July, Money.ca reported.

The jobs report is the central bank’s last look at the labour market before the Oct. 28 announcement, which will come with a new Monetary Policy Report, according to the Bank of Canada’s website. The bank held its rate at its Sept. 2 decision, and Money.ca said the rate has now been unchanged at 2.25 per cent at seven consecutive decisions this year.

Andrew Hencic, a senior economist at TD Economics, said the report will “pour some more cold water on near-term rate hike expectations.” He said markets had priced in roughly 27 per cent odds of an October hike, according to Money.ca.

CIBC economists said in a note Friday that the central bank will “remain patient and keep interest rates on hold, for now.”

The discussion of a hike, rather than a cut, reflects inflation. Money.ca reported that Statistics Canada’s consumer price index rose 3.0 per cent in August, pushed up by gasoline prices that were 22.8 per cent higher than a year earlier. That is above the bank’s two per cent target and leaves policymakers with a labour market that is weakening and prices that are not.

Global News reported that market expectations have shifted toward slightly higher odds of a hike “sooner rather than later,” though it did not name an expected outcome for Oct. 28.

The job losses were not spread evenly. Workers aged 15 to 24 lost 48,000 jobs in September, and women aged 25 to 54 lost 28,000, Statistics Canada said. The youth unemployment rate was little changed at 13 per cent.

By industry, educational services lost 35,000 jobs, health care and social assistance lost 23,000 and manufacturing lost 13,000, the agency said. Andrew Grantham, a senior economist at CIBC, said the manufacturing losses could be a sign that U.S. tariffs are starting to bite, according to Money.ca. The same report said the education drop may reflect slower international student enrolment.

Money.ca reported that Quebec lost 49,000 jobs, Ontario and British Columbia each lost 20,000, and Alberta gained 23,000, the only major province to add jobs. Those provincial figures come from a single outlet and have not been independently confirmed by Canada News Media.

For younger Canadians, the combination matters. A higher-for-longer rate means borrowing costs for mortgages and car loans are unlikely to fall soon, while a softer job market makes it harder to find work in the first place.

The next jobs report, for October, is due Nov. 6, after the bank’s decision. Until then, the Oct. 28 announcement is the next major signal on whether policymakers see weakness or inflation as the bigger risk. This story is developing.

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Via Money.ca and Global News. Bank of Canada rate and schedule from bankofcanada.ca.