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Canadian economy tops forecasts with 150000 new jobs in January; unemployment rate steady at 5%



The Canadian economy notched a blockbuster month of job creation in January, an expansion that sent shudders through financial markets as investors reassess the path of interest rates.

The labour market added 150,000 positions last month, after a gain of roughly 69,000 jobs in December, Statistics Canada said in a report published Friday. Financial analysts were expecting an increase of 15,000. The unemployment rate held steady at 5 per cent.

Monthly unemployment rate in Canada


date rate
2018-01-01 5.9
2018-02-01 6
2018-03-01 5.8
2018-04-01 5.8
2018-05-01 5.9
2018-06-01 6
2018-07-01 5.9
2018-08-01 6
2018-09-01 5.8
2018-10-01 5.7
2018-11-01 5.7
2018-12-01 5.7
2019-01-01 5.7
2019-02-01 5.8
2019-03-01 5.9
2019-04-01 5.7
2019-05-01 5.4
2019-06-01 5.6
2019-07-01 5.8
2019-08-01 5.8
2019-09-01 5.6
2019-10-01 5.6
2019-11-01 5.9
2019-12-01 5.6
2020-01-01 5.5
2020-02-01 5.7
2020-03-01 8.4
2020-04-01 13.6
2020-05-01 14.1
2020-06-01 12.4
2020-07-01 11
2020-08-01 10.2
2020-09-01 9.2
2020-10-01 9
2020-11-01 8.7
2020-12-01 8.9
2021-01-01 9.2
2021-02-01 8.5
2021-03-01 7.6
2021-04-01 8.2
2021-05-01 8.2
2021-06-01 7.8
2021-07-01 7.5
2021-08-01 7.2
2021-09-01 7.1
2021-10-01 6.6
2021-11-01 6.2
2021-12-01 6
2022-01-01 6.5
2022-02-01 5.4
2022-03-01 5.3
2022-04-01 5.3
2022-05-01 5.2
2022-06-01 4.9
2022-07-01 4.9
2022-08-01 5.3
2022-09-01 5.2
2022-10-01 5.2
2022-11-01 5.1
2022-12-01 5
2023-01-01 5


The United States reported last week a gain of 517,000 positions in January, an outsized increase that also surprised analysts.


The recent run of upbeat data points to a resilient economy that is managing to defy expectations by avoiding a recession. However, that underlying strength could force the Bank of Canada to continue raising interest rates – or keep them higher for longer – to get inflation under control.

After Friday’s report, traders of interest-rate swaps were pricing in a benchmark interest rate of 4.5 per cent at year’s end – unchanged from the current level. In recent weeks, they had been pricing in one or two rate cuts of a quarter-percentage-point later this year. (Bank of Canada Governor Tiff Macklem said earlier this week that it was “far too early” to think about cutting interest rates.)

Market expectations are constantly changing, and these views of future interest rates could be wrong. However, the shift is a sign that investors think interest rates will need to remain at elevated levels for longer to subdue inflation, given the underlying strength in the economy.

“If you’re data-dependent and you see 150,000 jobs created, it’s going to tilt you in a more hawkish direction,” said Andrew Grantham, senior economist at CIBC Capital Markets, a reference to more restrictive monetary policies.

However, “data in Canada can be very volatile on a month-to-month basis,” so the Bank of Canada won’t be “obliged to react to any one data release, no matter how strong it was.”

Friday’s report showed strength in various parts of the labour market. Jobs with full-time hours increased by 121,000 in January, while the private sector drove a gain of 115,000 positions.

After several months of losses, retail and wholesale trade jumped by 59,000 jobs, the largest gain by industry. Health care and social assistance rose by 40,000 positions.

The labour market is drawing plenty of new participants. In January, an additional 153,000 people joined the labour force – meaning, they either took jobs or are actively looking for one. The participation rate is increasing in most major demographic groups.

Canada’s population is growing quickly, which is helping to expand the supply of labour. However, the labour force is growing at a quicker pace than the population, indicating that many people are being coaxed into jobs. For example, Statscan noted that mothers of young children have had a big increase in their employment rate over the past year.

From the Bank of Canada’s perspective, the rapid expansion in available workers is a hopeful sign, because it allows companies to find employees, but without a further tightening of labour market conditions that puts upward pressure on wages, Mr. Grantham said.

“The potential of the economy may be higher than what people anticipated. And that means you don’t necessarily need to slow the economy very much, or at least you don’t need to have a recession, to get inflation back to target,” he said.

By now, many economists projected that Canada would be mired in the early stages of a mild recession. The Bank of Canada said that growth would stall over the first half of 2023. Instead, Friday’s report suggests the economy is continuing to chug along with positive growth, at least for now.

Several analysts said Friday that the Bank of Canada was unlikely to overreact to a blowout gain in employment when it makes its next rate decision on March 8.

At its last announcement, on Jan. 25, the central bank raised its key interest rate to 4.5 per cent but said that it expects to hold off on further rate hikes. Bank officials said this was a “conditional pause,” and that they could still raise rates if there was an “accumulation of evidence” that inflation wasn’t coming down and the economy was proving stronger than expected.

“Today’s report is sure to raise eyebrows at the Bank of Canada,” James Orlando, director and senior economist at Toronto-Dominion Bank, said in a note to clients. “The Bank won’t adjust course after one report, but it will be closely watching to see if this trend of massive job gains continues.”

Average hourly wages rose 4.5 per cent over the past year, down from 4.8 per cent in December. However, the year-over-year comparison was partly a reflection of higher wages in January, 2022, when many lower-paid service workers were temporarily laid off as the Omicron variant of COVID-19 led to a spike of infections.

Mr. Macklem has said that unemployment will need to rise and wage growth will need to ease to bring inflation under control.

“The labour market is very tight. It can’t stay this tight,” Mr. Macklem said at a press conference earlier this week. “If the labour market stays this tight, we’re not going to get back to 2-per-cent inflation.”

With a report from Mark Rendell


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Economy grew 0.5 per cent in January, Statistics Canada reports –



OTTAWA — Economic growth resumed in January and came in better than first expected following a small contraction in December, Statistics Canada said Friday.

Real gross domestic product rose 0.5 per cent to start the year, the agency said, beating its initial estimate for a gain of 0.3 per cent for the month and reversing a contraction of 0.1 per cent in the final month of 2022. 

Statistics Canada also said its initial estimate for February indicates growth continued with a gain of 0.3 per cent, though it cautioned the figure will be updated.


“There were many indications that the economy got off to a solid start in 2023, but today’s double-barrelled blast of strength is well above even the most optimistic views,” BMO chief economist Douglas Porter wrote in a report.

“Even if growth stalls in March, it now looks like Q1 will post growth of 2.5 per cent, up from a flat read in Q4. While we continue to look for a notable cooldown in the next two quarters, we are bumping up our GDP growth estimate for all of 2023 by three ticks to 1.0 per cent.”

The growth in January came as goods-producing industries gained 0.4 per cent for the month, while services-producing industries rose 0.6 per cent.

Statistics Canada said many of the main drivers for growth in January also contributed the most to the decline in December.

The wholesale trade, transportation and warehousing, and mining, quarrying and oil and gas extraction sectors all rebounded after falling in the previous month.

Wholesale trade gained 1.8 per cent in January, helped by wholesalers of machinery, equipment and supplies, while the mining, quarrying and oil and gas extraction sector grew 1.1 per cent after falling 3.3 per cent in December.

The transportation and warehousing sector added 1.9 per cent in January, more than offsetting a drop of 1.1 per cent in December that was due in part to bad weather.

This report by The Canadian Press was first published March 31, 2023.

The Canadian Press

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Canada's economy shows surprising resilience despite rate hikes – BNN Bloomberg



Canada’s economy kept growing at the start of this year, defying expectations of a stall and eventual technical recession in the face of the highest interest rates in 15 years.

Preliminary data suggest gross domestic product expanded 0.3 per cent in February, Statistics Canada reported Friday in Ottawa, led higher by oil and gas, manufacturing, and finance and insurance sectors. That followed a 0.5 per cent expansion in the previous month, stronger than expectations for 0.4 per cent growth in a Bloomberg survey.

The Canadian economy is now on track to expand at an annualized rate of 2.8 per cent in the first quarter, assuming growth in March comes in flat. That’s much more robust than the 0.5 per cent annualized pace forecast by the Bank of Canada in January, when it signaled a conditional rate pause. 


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“Today’s double-barreled blast of strength is well above even the most optimistic views,” Bank of Montreal Chief Economist Doug Porter said in a report to investors. “Suffice it to say that if the strength seen in the opening months of the year persists, the BoC is going to find itself in a tough spot.”

Canada’s currency reclaimed nearly all of its losses after the release and bonds rallied. The yield on benchmark government two-year debt fell more than 3 basis points to 3.777 per cent at 9:50 a.m. in Ottawa. 

The data suggest while some rate-sensitive sectors like housing have already cooled, overall economic growth is still holding up better than expected. It’s also at odds with a flurry of early estimates released last week that suggested a pullback in economic activity, with retail, wholesale and manufacturing sales all falling in February.

Friday’s numbers will test Governor Tiff Macklem and his officials as they look for evidence that monetary policy is sufficiently restrictive to bring inflation back to the central bank’s 2 per cent target. An accumulation of stronger-than-expected data may prompt them to stay on the sidelines for longer or even hike again.

Traders in overnight swaps markets, however, are betting the Bank of Canada’s next move will be a cut, given turmoil in global financial markets after the failure of regional U.S. lenders and a government brokered takeover of a European banking giant.

Economists in a monthly Bloomberg survey see 1 per cent annualized growth in the first three months of this year. But that’s expected to be followed by two straight quarterly contractions.

During deliberations for the central bank’s March 8 decision to hold rates steady for the first time in nine meetings, policymakers said they saw “clear signals” hikes so far were curbing demand. But there are few signs in recent data that the economy is gearing down.

Both goods-producing and services-producing industries were up in January, with nearly all sectors posting increases, except agriculture, utilities and management of companies.

Rebounds in several industries drove the January gain. Many of the key growth drivers were the largest contributors to December’s 0.1 per cent decline, including wholesale, transportation, and oil and gas industries. Accommodation and food services activity was also a key contributor.

“The Bank of Canada is likely at a crucial juncture and facing a significant dilemma,” Charles St-Arnaud, chief economist at Credit Union Central Alberta Ltd., said in a report to investors. “The central bank may have to choose between fighting inflation and hiking interest rates again or focusing on financial stability and keeping rates on hold.”

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UK economy avoids recession but businesses still wary



LONDON, March 31 (Reuters) – Britain’s economy avoided a recession as it grew in the final months of 2022, according to official data which showed a boost to households’ finances from state energy bill subsidies but falling investment by businesses.

With the economy still hobbled by high inflation and worries about a weak growth outlook, gross domestic product (GDP) increased by 0.1% between October and December after a preliminary estimate of no growth.

GDP in the third quarter was also revised to show a 0.1% contraction, a smaller fall than initially thought, the Office for National Statistics (ONS) said on Friday.

Two consecutive quarters of contraction would have represented a recession.


Despite the improvement, British economic output remained 0.6% below its level of late 2019, the only G7 economy not to have recovered from the COVID-19 pandemic.



“The latest release takes the UK a little further away from the recessionary danger zone although the report does not change the overall picture that the economy’s performance was lacklustre over the second half of 2022 as the cost of living crisis hit hard,” Investec economist Philip Shaw said.

The International Monetary Fund forecast in January that Britain would be the only Group of Seven major advanced economy to shrink in 2023, in large part because of an inflation rate that remains above 10%.

Since then, a string of economic data has come in stronger than expected by analysts.

Ruth Gregory at Capital Economics said Friday’s figures showed high inflation had taken a slightly smaller toll than previously thought.

“But with around two-thirds of the drag on real activity from higher rates yet to be felt, we still think the economy will slip into a recession this year,” she said.

House prices slid in March at the fastest annual rate since the financial crisis, mortgage lender Nationwide said.

The Bank of England (BoE) last week raised interest rates for the 11th consecutive meeting and investors are split on the possibility of another increase in May.

Britain’s dominant services sector rose by 0.1%, boosted by a nearly 11% jump for travel agents, echoing other data which has pointed to a surge in demand for holidays.

Manufacturing grew by 0.5%, driven by the often erratic pharmaceutical sector, and construction grew by 1.3%.

Individuals’ savings were boosted by the government’s energy bill support scheme and households’ disposable income increased by 1.3% after four consecutive quarters of negative growth.

The BoE expects Britain’s economy to have contracted by 0.1% in the first three months of 2023 but it forecasts slight growth in the second quarter.

The outlook has improved thanks in large part to falling international energy prices and a strong jobs market.

But the picture could darken again if recent turmoil in the global banking sector leads to lenders reining in loans.


The data suggested businesses remained cautious. Business investment fell 0.2% in quarterly terms, a sharp downgrade from a first estimate of a 4.8% rise after changes to the way the ONS calculates seasonal adjustments.

Earlier on Friday, a survey painted a more upbeat picture for businesses.

Finance minister Jeremy Hunt this month announced new tax incentives to encourage companies to invest, although they were less generous than a previous scheme and came just as corporate tax is due to jump.

The ONS said Britain posted a shortfall in its current account in the fourth quarter of 2.5 billion pounds ($3.1 billion), or 0.4% of GDP.

Excluding volatile swings in precious metals, the shortfall fell to 3.3% of GDP from 4.2% in the third quarter.

The ONS said increased foreign earnings by companies, particularly in the energy sector, helped narrow the deficit.

Britain’s financial account surplus – which shows how the current account deficit was funded – comprised large net inflows of short-term, “hot” money. Foreign direct investment was negative in net terms for a sixth quarter running.

($1 = 0.8073 pounds)

Additional reporting by William James, graphic by Vineet Sachdev; Editing by Robert Birsel and Catherine Evans

Our Standards: The Thomson Reuters Trust Principles.



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