Economy
‘Zero signs of economic stress’: What economists say about the blockbuster jobs report
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.
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.”
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.
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.
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.
“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.
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.
“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.”
Economy
Energy stocks help lift S&P/TSX composite, U.S. stock markets also up
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Economy
Canada’s inflation rate hits 2% target, reaches lowest level in more than three years
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
The Canadian Press. All rights reserved.
Economy
Federal money and sales taxes help pump up New Brunswick budget surplus
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
-
Sports22 hours ago
Edler to sign one-day contract to retire as a Vancouver Canuck
-
News22 hours ago
Billie Jean King set to earn another honor with the Congressional Gold Medal
-
News22 hours ago
Account tweaks for young Instagram users ‘minimum’ expected by B.C., David Eby says
-
News21 hours ago
Langford, Heim lead Rangers to wild 13-8 win over Blue Jays
-
News7 hours ago
Canada’s Hughes may be what International team has been missing at Presidents Cup
-
News22 hours ago
Man from Phoenix, Ariz., missing after truck plunges off Yukon bridge
-
News11 hours ago
Rogers Communications to buy out Bell’s share of MLSE for $4.7 billion
-
News11 hours ago
In the news today: Foreign interference inquiry resumes, Indigenous artist recognized