What economists say about Canada’s job numbers
Impact on BOC decisions for interest rates
Here’s what economists are saying about December’s jobs numbers, which were virtually unchanged from the month before, and what they mean for the Bank of Canada and interest rates.
NATHAN JANZEN, RBC ECONOMICS
“The bottom wasn’t falling out from under Canadian labour markets in December. But employment growth has slowed, the unemployment rate is still up significantly from the spring, and (despite still surging population counts) hours worked outright declined in Q4 for the first time since Q2 2020. The Bank of Canada will still be cautious about pivoting to rate cuts too quickly — and wage growth is still running above the pace historically consistent with their two per cent inflation target. But our own expectation is that the economic backdrop is soft enough for inflation to continue to move lower and that the BOC will start to push the overnight rate lower around mid-year this year.”
ANDREW GRANTHAM, CIBC
“While a further decline in the employment rate is evidence that the labour market continues to weaken, the decline in participation and acceleration in wage growth suggests that it isn’t loose enough for the Bank of Canada to cut interest rates quite yet. We continue to see the unemployment rate creeping higher in the first half of 2024, reaching a peak of between six to 6.5 per cent, which would bring a first interest rate cut from the Bank in June.”
STEPHEN BROWN, CAPITAL ECONOMICS
“The unchanged level of employment in December is consistent with the message from the business surveys that labour demand has weakened significantly in recent months. Nonetheless, with wage growth accelerating again last month, weaker employment growth may not be enough to persuade the Bank of Canada to cut interest rates as soon as we forecast.
“The big worry is that average hourly earnings growth rose to 5.4 per cent year over year, from 4.8 per cent. The move in December implies that average earnings jumped by 0.6 per cent month over month in seasonally adjusted terms, following the 0.5 per cent rise in November. With productivity growth currently negative, that is far too high to be consistent with the Bank of Canada’s two per cent inflation target. While alternative measures generally point to slower wage growth, the jump in the (labour force survey) measure of wage growth still presents a clear risk to our view that the Bank will be ready to cut interest rates as soon as its March meeting.”
DOUGLAS PORTER, BMO ECONOMICS
“Today’s sluggish results suggest that the softening seen in the broader economy is finally catching up with the job market. Prior to December, employment gains had remained amazingly sturdy in the face of paltry GDP growth (at the expense of sickly productivity). That may now be shifting. If so, this would suggest that the jobless rate is almost certain to head higher, pushing above six per cent in coming months. In turn, that should eventually take some steam out of wage gains.
“For the Bank of Canada, the sticky wage strength, combined with the solid U.S. payroll results today, will more than offset the sluggish domestic job tally. We continue to expect the Bank to be very patient on the rate cutting front.”
CHARLES ST-ARNAUD, ALBERTA CENTRAL
“We think the BOC is unlikely to contemplate rate cuts until inflation has been brought sustainably below three per cent. This is unlikely to happen until the late spring. However, the timing of the first rate cut could be brought forward if growth slows more than expected in the coming months, suggesting a harder landing. Whether the country experiences a soft or hard landing depends heavily on the health of the evolution of the labour market, i.e. whether we see a hiring freeze or broad-based layoffs as the economic activity slows further.”