Jul 8, 2022
'Tightest job market in generations': Bay St. reacts to Canada's record-low unemployment
, BNN Bloomberg
Labour participation will be a growing constraint: Indeed.com Economist
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Canada’s unemployment rate fell to a record low of 4.9 per cent in June, Statistics Canada reported Friday.
The agency attributed that to fewer Canadians looking for work as the participation rate slipped 0.4 per cent in the month.
Meanwhile, the economy shed a net 43,200 jobs last month. Even so, experts say the record-low unemployment rate points to a tight labour market for the Canadian economy.
Here’s what some of the country’s leading economists and strategists had to say about the numbers. Unless otherwise indicated, their comments are from notes to clients.
Royce Mendes, managing director and head of macro strategy, Desjardins Capital Markets
Truth be told, this is one of the strangest Labour Force Surveys in recent memory, which is really something given the pandemic. But the story remains largely the same. With inflation sky high, the Bank of Canada (BoC) needs to hike rates aggressively to get [to] more appropriate levels even if there are more cracks forming in the foundation of the economy.
Avery Shenfeld, chief economist, CIBC Capital Markets
All told, a mixed bag in what’s often a volatile series, and on its own, the headline jobs decline isn’t yet convincing evidence of a slowdown that will deter the Bank of Canada from a 75 basis point (bp) hike next week.
Rishi Sondhi, economist, TD Economics
June's soft employment print (coupled with last week's flash estimate for a decline in GDP during May), signals that Canadian economic momentum is softening. This is consistent with our view that growth will ease in the second half of this year. That said, details of the report were more encouraging, as hours worked climbed significantly during the month.
Doug Porter, chief economist, BMO Capital Markets
Forget the messy headline number. The main takeaway here is that Canada has the tightest job market in generations, and now wages are starting to move with purpose. Inflation has now landed with a thud in the job market, simply reinforcing the loud message for the Bank of Canada. We fully expect at least a 75 bp hike at next week's meeting.
Nathan Janzen, assistant chief economist, RBC Economics
The drop in employment was the first decline since January, and the first outside of a significant pandemic lockdown since November 2019. The drop still reflects more labour supply issues than any significant slowing in hiring demand.
We look for the BoC to hike the overnight rate by 75 basis points next week on the way up to a 3.25 per cent rate before the end of 2022.
Andrew Kelvin, chief Canada strategist for TD Securities
From a TV interview with BNN Bloomberg.
“I do think there’s a note of caution that needs to be sounded here. When we look at Canadian labour market data, it tends to be a very volatile series month-to-month. So I think it’s difficult to look at any one data point and try and signal a trend. Now, I’m obviously a little bit concerned that we lost jobs in June, it looks like the economy slowed a bit in May based on early indicators, and it would be certainly a bad sign that the economy slowed two months in a row, particularly given what we’re seeing with tighter financial conditions.”
Kelvin was also asked how the data should be viewed by the country’s central bank.
“The Bank of Canada has nothing to lose by sounding as hawkish as they possibly can here. It's important they signal commitment to their inflation target, because if the market starts doubting their credibility, it makes their job quite a bit more difficult."
The agency attributed that to fewer Canadians looking for work as the participation rate slipped 0.4 per cent in the month.
Meanwhile, the economy shed a net 43,200 jobs last month. Even so, experts say the record-low unemployment rate points to a tight labour market for the Canadian economy.
Here’s what some of the country’s leading economists and strategists had to say about the numbers. Unless otherwise indicated, their comments are from notes to clients.
Royce Mendes, managing director and head of macro strategy, Desjardins Capital Markets
Truth be told, this is one of the strangest Labour Force Surveys in recent memory, which is really something given the pandemic. But the story remains largely the same. With inflation sky high, the Bank of Canada (BoC) needs to hike rates aggressively to get [to] more appropriate levels even if there are more cracks forming in the foundation of the economy.
Avery Shenfeld, chief economist, CIBC Capital Markets
All told, a mixed bag in what’s often a volatile series, and on its own, the headline jobs decline isn’t yet convincing evidence of a slowdown that will deter the Bank of Canada from a 75 basis point (bp) hike next week.
Rishi Sondhi, economist, TD Economics
June's soft employment print (coupled with last week's flash estimate for a decline in GDP during May), signals that Canadian economic momentum is softening. This is consistent with our view that growth will ease in the second half of this year. That said, details of the report were more encouraging, as hours worked climbed significantly during the month.
Doug Porter, chief economist, BMO Capital Markets
Forget the messy headline number. The main takeaway here is that Canada has the tightest job market in generations, and now wages are starting to move with purpose. Inflation has now landed with a thud in the job market, simply reinforcing the loud message for the Bank of Canada. We fully expect at least a 75 bp hike at next week's meeting.
Nathan Janzen, assistant chief economist, RBC Economics
The drop in employment was the first decline since January, and the first outside of a significant pandemic lockdown since November 2019. The drop still reflects more labour supply issues than any significant slowing in hiring demand.
We look for the BoC to hike the overnight rate by 75 basis points next week on the way up to a 3.25 per cent rate before the end of 2022.
Andrew Kelvin, chief Canada strategist for TD Securities
From a TV interview with BNN Bloomberg.
“I do think there’s a note of caution that needs to be sounded here. When we look at Canadian labour market data, it tends to be a very volatile series month-to-month. So I think it’s difficult to look at any one data point and try and signal a trend. Now, I’m obviously a little bit concerned that we lost jobs in June, it looks like the economy slowed a bit in May based on early indicators, and it would be certainly a bad sign that the economy slowed two months in a row, particularly given what we’re seeing with tighter financial conditions.”
Kelvin was also asked how the data should be viewed by the country’s central bank.
“The Bank of Canada has nothing to lose by sounding as hawkish as they possibly can here. It's important they signal commitment to their inflation target, because if the market starts doubting their credibility, it makes their job quite a bit more difficult."
