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‘Zero signs of economic stress’: What economists say about the blockbuster jobs report



The jobs report was “even more impressive,” said James Orlando, senior economist at TD Economics, because the “gains were concentrated in full-time jobs in the private sector.”

Of the gain, 121,000 were full-time positions and 28,900 were part-time. The unemployment rate held steady at five per cent and the participation rate rose to 65.7 per cent from 65 per cent in December, the national data agency said.

The economy has added over 800,000 positions since the start of the pandemic, Royal Bank of Canada said in its analysis of the jobs report, adding that “two-thirds of job gains were driven by prime-age workers” in the 25 to 54 age category.

It’s the second month in a row the strength of the employment market has taken forecasters by surprise. The economy, in December reported a gain of 104,000 positions, blowing past forecasts for an increase of 5,000 additional positions, although, the  report was “heavily revised downward” by 33,000 positions, said Jay Zhao-Murray, an FX market analyst with Monex Canada, in an email, “and we may get a repeat of that scenario this month.”

At the time, economists said the strong December numbers would prompt the Bank of Canada to increase interest rates, which it did at its Jan. 27 meeting, hiking its benchmark lending rate to 4.5 per cent.

Based on the latest jobs numbers, some economists say markets could start pricing in another rate hike. The Bank of Canada indicated last month that it would likely pause its hiking campaign if economic data over the next few months tracked along its expectations.

Here’s what economists are saying about the jobs numbers, what they mean for a potential soft-landing for the economy and interest rates.


James Orlando, TD Economics

“It was a blowout report for the Canadian labour market. The 150,000 jobs gain is one thing, but the fact that gains were concentrated in full-time jobs in the private sector, alongside people working more hours, makes this an even more impressive report. Although the seasonal adjustment should be called into question, the sheer size of this print points to a further boost to consumer spending and overall GDP to start the year.

“Today’s report is sure to raise eyebrows at the Bank of Canada. Their conditional pause on further rate hikes is predicated on a slowing of economic growth and an easing in the labour market. 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.”


Andrew Grantham, CIBC Economics

“Another month, another blockbuster job print for the Canadian economy …. Unlike during the latter part of last year, the strong job figure was also accompanied by an increase in hours worked (+0.8 per cent) as sickness-related absenteeism was closer to seasonal norms, which is a positive for GDP and suggests that the economy certainly isn’t on the verge of recession.

“The Bank of Canada’s conditional pause on interest rates was likely done partly so that policymakers didn’t feel the need to respond to any single strong data print, no matter how strong, but rather assess how the economy is faring over the course of a few months. However, that won’t stop markets reacting to today’s strong data by pricing in a greater probability of further hikes, and pricing out rate cuts.”


Stephen Brown, Capital Economics

“The surge in employment and strong rise in hours worked in January suggest that GDP growth will be stronger than we anticipated this quarter. However, the decline in wage growth means that unexpected strength is unlikely to prompt the Bank of Canada to switch back to hiking mode.

“The 150,000 jump in employment was 10 times as large as the consensus estimate. While the gain was partly due to an unusually large 63,000 rise in the population last month, amid strong immigration, the labour force increased by an even larger 153,000, thanks to a 0.3 percentage-point rise in the participation rate.

“Despite the bumper gain, the labour market data are unlikely to move the needle much for monetary policy, not least because wage growth declined to 4.5 per cent year over, from a downwardly revised 4.7 per cent — it was previously estimated at 5.2 per cent in December. Nevertheless, together with the 0.8 per cent month over month rise in hours worked last month, the data pour cold water on the idea that the economy is on the cusp of recession and suggest we need to revise up our forecast of a 1.5 per cent annualized decline in GDP this quarter.”

Douglas Porter, BMO Economics

“Canadian employment soared 150,000 in January, the largest non-pandemic monthly rise on record and a loud echo of the rollicking U.S. jobs report a week ago. Even in percentage terms, the 0.75 per cent month over month gain is larger than anything seen in the 40 years before COVID.


“Note that actual, or non-seasonally adjusted, employment fell by 125,000 in January — prior to the pandemic, a “normal” January would see a job loss of 250,000-to-300,000 in unadjusted terms. So, evidently, there simply were far, far fewer layoffs than in a normal year at the start of 2023. Instead of an actual hiring boom, what we instead saw last month was a layoff freeze, given how hard it is to find workers in the current environment. To be clear, this is not to dismiss the strength in the headline number; the data are seasonally adjusted for a reason. It’s more to explain what the underlying story may be in this complicated backdrop.


Bottom Line: One always has to take care when reading a Canadian employment report — for example, the prior month’s huge gain was itself revised down (earlier) by more than 30,000 jobs. Still, even if there are some misgivings about the massive headline gain, the labour market is sending precisely zero signs of economic stress. For the Bank of Canada, the strong report must make them at least a tad nervous about their freshly-minted pause — we said the bar for any move would be very high, but the employment gain is pretty towering indeed. This is actually the last jobs report the Bank will see before it next decides in March, but their upcoming decisions will largely be determined by inflation, and the employment data may prove to be just loud noise, provided inflation continues to ebb.”


Charles St-Arnaud, Alberta Central

“Today’s Labour Force Survey data suggest the labour market in Canada remains strong and resilient. The low unemployment rate continues to signal that the labour market remains very tight, something the Bank of Canada is closely monitoring. Moreover, the report also shows that wage growth, while slowing, remains robust, with average wages increasing by 4.2 per cent year over year.


“A robust labour market is a challenge for the Bank of Canada. As we have explained on numerous occasions, the bank needs to slow growth and create some excess capacity in the economy to fight inflation. This will likely lead to a rise in the unemployment rate and job losses. With this in mind, continued strength and tightness in the labour market may not be a welcomed outcome for the Bank of Canada.

“The continued resilience of the labour market raises the odds that the bank will increase its policy rate at its next meeting on March 8. However, whether the bank hikes further depends on inflation, with the next release on Feb. 21, and the growth outlook. Nevertheless, it may require some signs that underlying inflationary pressures are not moderating as quickly as expected for the bank to hike at the March meeting.”


Carrie Freestone, Royal Bank of Canada

“Headline numbers conflict with recent Bank of Canada Survey data. The Bank of Canada Business Outlook Survey indicated business plans to hire staff have fallen alongside wage growth. This conflicts with the January Labour Force Survey data. Indeed, year-over-year wage growth has fallen to 4.5 per cent year-over-year, but hiring continues at a rapid pace and the unemployment rate held steady at a near record low 5 per cent. Any signs of labour market cooling require a deeper dive beyond headline numbers.

“Job postings are still up 50 per cent from pre-pandemic levels, but have come down in recent months. It remains our view that labour markets will not remain this tight over the near term. The delayed impact of the Bank of Canada’s 425 basis points of hikes are still gradually flowing through to household and business debt payments and will ultimately erode demand, pushing unemployment higher through the end of the year. Moreover, with record high participation and fewer unemployed Canadians to fill jobs, job creation is not sustainable at the current pace.


“The Bank of Canada has indicated that rates will be held steady unless there is sufficient evidence that more restrictive monetary policy is needed. While the Bank of Canada will likely look past one strong jobs report, if additional reports prove to be stronger than expected, this would pose upside risk to the current terminal rate forecast of 4.5 per cent.”


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Charting the Global Economy: Fed, BOE, SNB Push Ahead With Hikes



(Bloomberg) — The Federal Reserve, Bank of England and Swiss National Bank all proceeded with expected interest-rate increases this week, reinforcing their commitments to curb inflation despite turmoil in the banking sector.

Policymakers in the US and UK hiked by a quarter point while those in Switzerland opted for a half point. All three signaled more increases could be in store.

The UK was especially under pressure to tighten policy after a report earlier in the week showed consumer prices advanced 10.4% in February, surpassing all estimates in a Bloomberg survey and bucking economists’ expectation of a slowdown.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:



Iceland’s central bank extended western Europe’s longest policy-tightening campaign with a full percentage-point increase, while the Philippine central bank shifted to a smaller hike. Norway, Taiwan and Nigeria also kept hiking. Officials in Turkey left rates unchanged, as did those in Brazil despite pressure from the government for looser policy.

The rush of layoffs that began late last year isn’t letting up, marking the worst start to a year since 2009, with nearly 52,000 jobs lost in one week in January alone. Since Oct. 1, executives across sectors have sacked almost half a million employees around the world, according to a comprehensive review of layoffs by Bloomberg News.


History remembers Paul Volcker as the slayer of inflation, and Ben Bernanke as the crisis firefighter. Jerome Powell is in danger of having to play both roles at once — or, what may be worse, to choose between them.

Powell and his colleagues are expecting a sharp dropoff in economic activity through the rest of 2023 — at least, that’s the implication from new economic projections they published this week.

Rent increases for US single-family homes eased for a ninth straight month in January, pushing the annual rate to the lowest since the spring of 2021, according to CoreLogic. All 20 major metro areas tracked by CoreLogic posted single-digit annual rent increases, for the first time since late 2020.


UK inflation accelerated unexpectedly in February for the first time in four months, keeping the BOE on course to raise interest rates. Food and non-alcoholic drink prices soared 18%, the fastest pace in 45 years, while core and services inflation also picked up.

Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede. The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global.


China’s population is emerging from a massive virus wave unleashed by the rapid reversal of Covid Zero in mid-December. People are planning trips, dining out and returning to shopping malls. Still, residents of the world’s second-biggest economy aren’t splashing out like they used to.

South Korea’s early trade data showed a deepening slump in exports as global demand for semiconductors remains weak and China’s reopening is yet to generate any boost.

Singapore’s core inflation, a key barometer for the central bank, kept its 14-year-high pace in February as officials weigh fresh threats to the global economy amid the Federal Reserve’s resolve to stay the course on tightening.

Emerging Markets

Sri Lanka clinched a $3 billion bailout loan from the International Monetary Fund after six months of negotiations. Now comes the harder part: getting a debt restructuring agreement and seeing through monetary policy and tax reforms.

—With assistance from Mathieu Benhamou, Ruchi Bhatia, Matthew Boesler, Libby Cherry, Jo Constantz, Jennah Haque, Jinshan Hong, Michelle Jamrisko, Sam Kim, Phil Kuntz, Karen Leigh, Rich Miller, Tom Rees, Zoe Schneeweiss, Naomi Tajitsu, Alex Tanzi, Kevin Varley, Alexander Weber and Karl Lester M. Yap.


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Euro-Area Economy Strengthens More on Service-Sector Surge – Financial Post



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(Bloomberg) — Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede.

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The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global. Manufacturing output broadly stagnated, however, only supported by a backlog of orders as demand continued to fall.


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“Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” said Chris Williamson, an economist at S&P Global.

Sentiment in Europe has been improving as it became clear that the region would avoid worst-case scenarios for access to natural gas predicted after Russia cut off supplies to the bloc. Recent turmoil in the banking sector has cast some doubt on how the global economy will develop, though European officials have sounded confident that the sector can withstand any fallout.

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While activity improved in both Germany and France, the strongest performance came in the rest of the 20-nation euro area.

What Bloomberg Economic Says…

“The euro-area composite PMI survey for March suggests the economy is beginning to emerge from a period of stagnation and holding up well under the weight of higher interest rates. While monetary policy works with long and variable lags and choppy waters may still lie ahead, the resilience of the economy should allow the hawks at the European Central Bank to succeed in pushing for more interest rate increases”

—David Powell, economist. For full analysis, click here

Inflation is still running far above the European Central Bank’s 2% target, however, with underlying data becoming the key focus for policymakers. While price gains continued to moderate in March, they remain elevated by historical standards, according to S&P Global.

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“Such stubborn inflationary pressures, fueled primarily by the service sector and rising wage costs, will be a concern to policymakers and suggests that more work may be needed in terms of bringing inflation down to target,” Williamson said.

The jobs market also remained resilient. Employment growth reached a nine-month high, with acceleration seen especially in services in line with rising demand.

Firms’ confidence in the business outlook dipped, though it remained well above levels seen in late 2022. That could be linked to concerns over uncertainty caused by banking-sector stress and the impact of further increases in interest rates, S&P Global said.

The composite PMI reading for the UK edged lower to 52.2 in March from 53.1 the previous month, suggesting the economy has avoided a recession for now. British companies are the most confident they’ve been since the start of Russia’s invasion of Ukraine.

Data earlier revealed activity in Japan’s services sector edged up to the strongest in almost a decade as the return of Chinese tourists boosted demand. The US number due later on Friday is expected to be below 50.

—With assistance from Mark Evans, Joel Rinneby, Tom Rees and Zoe Schneeweiss.

(Updates with UK PMI data in 10th paragraph.)

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Economy headed into a ‘Bermuda Triangle’ financial crisis: Nouriel Roubini



  • The economy is headed into a “Bermuda Triangle” of risk, economist Nouriel Roubini warned.
  • Roubini pointed to three stressors facing the US economy.
  • He sounded the alarm for a stagflationary debt crisis and a severe recession to hit the US.

In a recent interview on the McKinsey Global Institute’s “Forward Thinking” podcast, the top economist warned that the economy was risking another financial crisis as central bankers continue to tighten monetary policy.


Federal Reserve officials raised interest rates another 25 basis-points this week, and have hiked rates 475 basis-points over the last year to control inflation. That marks one of the most aggressive Fed tightening cycles in history, and could place the economy under three different kinds of stress, Roubini warned.

First, high interest rates could easily overtighten the economy into a recession, experts say, which reduces income for households and corporations.

Second, high interest rates means firms are battling higher costs of borrowing and waning liquidity, which weighs on asset prices. Last year, US stocks plunged 20% amid the Fed’s rate hikes, with warnings from other market commentators of an even steeper crash in equities this year.

Finally, high interest rates are pressuring the mountain of debt, both private and public, that was amassed during the years of low rates, Roubini said. He pointed to bankrupt “zombies”, which include households, corporations, and governments.

“It’s got like, a Bermuda Triangle. You have a hit to your income, to your asset values, and then to the burden of financing your liabilities. And then you end up in a situation of distress if you’re a highly leveraged household or business firm. And when many of them are having these problems, then you have a systemic household debt crisis like [2008],” he warned.

Roubini, one of the experts who called the 2008 subprime mortgage crisis, has repeatedly sounded the alarm for another crisis to strike the US economy. The scenario he envisions combines the worst aspects of 70s-style stagflation with something like the 2008 crisis, with  a severe recession, stubborn inflation, and mounting debt levels bludgeoning economic growth.

He and other top economists have criticized the Fed’s aggressive rate hiking regime over the last year, and some experts have called central bankers to stop raising interest rates entirely out of fear of “breaking” something in the financial system.

Signs of stress are mounting, the most recent being the failure of Silicon Valley Bank. But pausing interest rates could panic investors and lead to a resurgence of inflation, meaning central bankers are powerless no matter what they do with rates, Roubini has said previously.


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