National Post (National Edition)
ONE AND DONE — FOR A WHILE JOBS PICTURE WARRANTS RATE HIKE AT BOC’S NEXT MEET-UP.
Last week, Sylvain Leduc, deputy governor at the Bank of Canada, gave a rare speech in Quebec City. At about the same time in Ottawa, Prime Minister Justin Trudeau made his move in the trade war with U.S. President Donald Trump.
Needless to say, Leduc, who, like the other deputies on the governing council, only gets to speak a couple of times a year, was robbed of his glory. One reporter — one! — showed up at the press conference that followed the speech. And you can guess what that journalist wanted to talk about first.
It’s unfortunate Leduc’s remarks received so little attention because that speech is currently the best guide to what the central bank will be watching between now and its next policy decision on July 11.
Bank of Canada Governor Stephen Poloz and his deputies insist they are “data dependent,” which means their plans for interest rates will be guided by information as it becomes available, not a predetermined path. A diligent watcher of monetary policy will have taken note of the indicators Leduc mentioned and start charting their evolution, assuming he or she hadn’t been doing so already.
So let’s do some of that analysis. This week brought updates of several key indicators, including new hiring figures for May. Those data alone cement the case for an interest-rate increase next month.
After recording outsized growth of three per cent in 2017, Canada’s economy has slowed to a more sustainable pace of around two per cent this year, and it appears to have plateaued.
Statistics Canada reported Friday that the unemployment rate was unchanged at 5.8 per cent for the fourthconsecutive month in May, and net hiring was essentially unchanged for the secondstraight month.
Some will find evidence of stagnation disappointing. Yet it’s important to keep in mind that hiring is stalling at a level that is consistent with full employment, or the state at which those who want a job have one. Canada’s economy is fine.
What interests the central bank these days is whether a longer period of low interest rates might strengthen the labour market at the margins. Leduc said in Quebec City that mediocre wage growth and levels of long-term unemployment that remained “significantly higher” than a decade ago suggested that there still was “slack” in the economy.
The latest StatCan numbers show that wages are becoming less mediocre, and that the number of idle workers who have been unemployed for longer than six months is starting to decline.