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(Bloomberg) — Canada’s job market lost jobs and the unemployment rate rose to its highest point in more than two years, signaling a further slowdown in the economy that will test the central bank’s patient stance on rate cuts.
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The country lost 2,200 jobs in March and the unemployment rate rose 0. 3 points to 6. 1 per cent, Statistics Canada reported Friday in Ottawa. The figures fell short of expectations for an increase of 25,000 jobs and an unemployment rate of 5. 9%, according to the median. estimate in a Bloomberg survey of economists.
This is the first job loss since July and the highest unemployment rate since January 2022. Outside of the Covid pandemic, Canada hasn’t noticed an unemployment rate above 6% since 2017.
U. S. data released at the same time showed the country added 303,000 jobs in March, beating estimates. Following those reports, the Canadian dollar saw its biggest intraday decline since February and was trading at C$1. 3645, in line with the U. S. dollar at 9:50 a. m. The yield on Canada’s benchmark two-year bond fell roughly four base issues on the day to 4. 14%.
The Canadian data highlights the growing weakness in the labour market, which will likely confirm that the Bank of Canada will soon want to start considering interest rate cuts. Job losses in March, following a slower pace of hiring than population growth in recent months, may also convince policymakers that there is sufficient strength to keep inflation on a sustainable downward trajectory towards the 2% target.
“The fissures that seemed to exist in the Canadian labour market have widened a lot,” Andrew Grantham, an economist at the Imperial Bank of Commerce of Canada, said in a report to investors.
“While markets had pushed back expectations for a first interest rate cut through the Bank of Canada following strong GDP insight earlier in the year, current labour force awareness brings them once again closer to those expectations, in line with our expectations for a first cut in June. “
Last month, Governor Tiff Macklem and his officials kept their key interest rate at 5% for the fifth straight meeting, acknowledging progress on inflation and reiterating that it was “too early” for easing. Macklem said there were signs that wage pressures were likely to rise. declining as hard-working markets continued to gradually ease.
This is the last of two jobs reports ahead of the Bank of Canada’s next rate ruling on April 10, when policymakers will also update their forecasts. Economists polled via Bloomberg expect the bank to keep rates low next week, with many expecting the easing cycle. to begin at the next meeting in June. Traders see an eight-in-ten chance of suffering a drop during this month.
“Ultimately, current knowledge confirms that the Canadian economy is not as strong as official GDP knowledge and the Bank of Canada claim, and that really broad rate cuts are needed for a bleaker slowdown,” said Simon Harvey, head of FX analysis. Monex Canada, he said in an email.
The increase in the unemployment rate in March was due to an increase of another 60,000 people looking for cadres or temporarily unemployed, bringing the total number of unemployed to 1. 3 million. Most of the other people who were unemployed in February also remained unemployed last year. month, which indicates a time of greater difficulty in locating paintings.
The participation rate remained at 65. 3% for the third consecutive month. The employment rate (the proportion of the working-age population that is employed) fell 0. 1 percentage points to 61. 4%, the sixth consecutive monthly decline.
Over the previous year, the employment rate fell by 0. 9 percentage points, and the creation of 324,000 jobs was outpaced by the expansion of 1 million working-age people. In 2023, Canada’s population grew at an annual rate of 3. 2%, one of the fastest. in the world due to high levels of immigration.
Read more: Canada’s economy will slow with new limits on immigrants
The Bank of Canada will most likely see the broader effects as a sign that deepening disinflationary pressures are ahead, Douglas Porter, lead economist at the Bank of Montreal, said in a report to investors. A June cut is now more likely, he said.
“So even with GDP rising, the door is open for the bank to be more dovish at next week’s meeting,” Porter said.
Total hours worked in March were unchanged for the month but increased 0. 7% from a year earlier.
Wage expansion for permanent workers accelerated to 5%, in line with expectations and from 4. 9% in the previous month.
Job losses occurred in accommodation and food services, which saw employment decline by 27,000 people. Wholesale and retail trade, as well as professional and technical services, also lost jobs. Health care, social assistance, and structure saw the largest job gains.
Regionally, employment declined in Quebec, Saskatchewan and Manitoba. While Ontario saw a surge, the province’s unemployment rate rose from 0. 2 per cent to 6. 7 per cent as more people looked for work.
The St. Catharines-Niagara metropolitan domain in Ontario saw the largest year-over-year increase in the unemployment rate, at 7. 6%, which is now that of major population centres. Unemployment rates in Toronto and Windsor reached 7. 5% in March.
–With Jay Zhao-Murray and Carter Johnson.
(Add the reaction of economists, update the market reaction. )
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