News follows an unexpectedly fast decline in GDP, analysts predict a BoC reaction
Statistics Canada released their November labour force survey today, revealing that despite adding 25,000 jobs the Canadian unemployment rate rose to 5.8%, driven by an immigration rate that is now outpacing hiring. Almost 60,000 jobs were added in full-time positions, while part-time positions fell by 21,000.
Manufacturing and construction saw the greatest job gains at 1.6% and 1.0% respectively. Wholesale and retail trade shed 27,000 jobs while finance, insurance, real estate, rental and leasing dropped 18,000 jobs. The financial sector has seen notable job cuts in Q4, with the most recent announcement of over 3,000 layoffs coming from TD.
StatsCan reports that most immigrants who have arrived to Canada in the past 5 years have faced challenges finding work related to their education or foreign experience.
Average hourly wages, however, rose by 4.8% to $34.28 in November.
Despite some positivity in headline numbers, Simon Harvey, head of FX Analysis at Monex Europe and Canada believes that the latest survey paints the Canadian economy in too rosy of a light.
“All told, today’s jobs report out of Canada is yet another piece of data that overstates the strength of the Canadian economy when viewing the headline figures in isolation,” Harvey says. “While the data isn’t concerning enough to prompt imminent discussion of rate cuts from the BoC, with that likely delayed until Q1 of next year, it certainly underscores the fact that the Canadian economy continues to fall further into excess supply.”
Markets have largely priced in a rate cut from the Bank of Canada in the second half of 2024 following the significant downturn in Canadian GDP growth reported yesterday. Harvey, however, believes that these jobs numbers should motivate a faster and more aggressive cut by the central bank.
“We think this should lead the BoC to cut rates more aggressively in 2024 than markets are currently discounting,” Harvey says. “The BoC will try to smooth out what looks to be a bumpy landing for the Canadian economy, which should see CAD underperform against the dollar at the start of 2024 and other petro-currencies from mid-2024 onwards.”