Interest rate cut jeopardized after big gains in jobs report

OTTAWA — The odds of a June interest rate cut from the Bank of Canada appear to have fallen after the latest jobs report from Statistics Canada showed employment jumped by 90,000 last month.

The jobs gain far surpassed forecasters’ expectations and marked the largest employment increase in more than a year.

The federal agency’s labour force survey Friday shows the unemployment rate held steady at 6.1% last month, while the employment gains were driven by part-time work.

James Orlando, TD’S director of economics, said the headline jobs number was a “real shocker” and that it “wasn’t even in the realm of anyone’s forecast.”

The April employment gain was the largest monthly increase since January 2023.

Friday’s report comes as economists have been widely expecting the central bank to begin lowering its policy rate in June or July.

The Bank of Canada has been particularly encouraged by progress made on inflation and has signalled that it’s inching closer to a rate cut.

But the latest employment numbers have made financial markets less certain an interest-rate cut will materialize next month.

TD continues to expect the first interest rate cut in July. Orlando said waiting until July will give the central bank more certainty that it’s not cutting interest rates prematurely.

“What that does is just gives the Bank of Canada just a little bit more time to make sure the current economic environment ... doesn’t lead to more inflation,” he said.

Orlando said the April labour force survey suggests there may have been more economic momentum in the second quarter, which could translate to higher consumer spending.

Bank of Canada Gov. Tiff Macklem has generally emphasized trends over one particularly strong or weak economic report.