Job losses keep door open for BOC to cut rate
Canada’s labour market slipped after two straight months of strength, sending the currency lower and providing the Bank of Canada with more ammunition if it decides to cut interest rates at its next meeting.
The country lost 1,800 jobs in October, Statistics Canada said Friday in Ottawa, versus economist expectations for a 15,000 uptick in employment. It was the first month of job losses since July and comes on the heels of a 135,000 job gain over the prior two months. The unemployment rate held steady at 5.5 per cent.
While the Bank of Canada left the door open for a rate cut last week after citing trade tensions, it’s held off from easing monetary policy in part because of the strength in the labour market that’s driving household consumption. That view could change if a pattern of a cooling jobs market emerges.
“The overall trend in employment is still respectable so I don’t think it will by itself push BOC to an immediate cut, but the risks are clearly rising,” Vassili Serebriakov, FX strategist at UBS Securities LLC, said by email.
The Canadian dollar fell on the report, falling 0.4 per cent to $1.3231 per U.S. dollar in afternoon Toronto trading. Yields on Canadian two-year government bonds were down four basis points to 1.58 per cent.
Full-time positions fell by 16,100, while part-time increased 14,300. The unemployment rate held steady at 5.5 per cent, matching the median forecast, and wage gains accelerated. Election-related hiring helped offset some of the declines with the public-sector adding 28,700 jobs despite a drop in private-sector and self-employment.
Trade figures Tuesday were also disappointing, missing forecasts on lower exports. Markets have priced in a 24-percent chance policy-makers led by governor Stephen Poloz will cut interest rates next month.
There were, however, bright spots in the October labour force survey.
Wage gains for permanent employees quickened to 4.4 per cent on the year, a sign that tightness in the jobs market is boosting pay. Hours worked advanced 1.3 per cent from a year earlier, matching last month’s pace. And even with October’s decline, Canada has added 356,300 so far in 2019, the most in the first 10 months of a year since 2002.