'These numbers shouldn’t change the bank's judgment,' says economist
Despite the Canadian economy's impressive addition of 90,000 jobs in April, questions remain about whether this growth will influence the Bank of Canada's interest rate decisions in June.
According to the latest Statistics Canada labour force survey, the job gains significantly surpassed the forecasted increase of 20,000 positions, marking the largest employment jump in over a year. However, the quality of these jobs is under scrutiny.
"Over half of those 90,000 jobs were part-time positions, and that reverses a trend we’ve seen since the end of the pandemic lockdowns," said Jim Stanford, economist and director of the Centre for Future Work, as reported by the Toronto Star.
For HR professionals, this surge in part-time employment may indicate a potential shift in the labour market. BMO chief economist Douglas Porter highlighted that the rise in part-time positions might reflect underlying economic weaknesses.
“In other words, a lot of the new entrants would actually like a full-time job, but really all they can get is part-time,” Porter stated, as cited by the Toronto Star.
Mixed signals from labour market
As economists have been anticipating a potential reduction in the central bank's policy rate in June or July, the latest employment data introduces uncertainty. The Bank of Canada, encouraged by progress on inflation, has hinted at a possible rate cut. However, financial markets are now less certain this will occur, according to the Toronto Star, given the mixed signals from the labour market.
Stanford remains optimistic about the rate cuts, suggesting that the current employment growth coupled with falling inflation should not deter the Bank of Canada's decision.
"These numbers shouldn’t change the bank’s judgment," he said in the Toronto Star, adding, "Employment is growing but inflation is still falling.”
The Bank of Canada's next interest rate decision is scheduled for June 5. Currently, its key interest rate stands at five percent, the highest level since 2001.
Rapid population growth
Despite the recent job growth, the job numbers still indicate that higher interest rates have impacted economic growth and the labour market, said the report. The unemployment rate held steady at 6.1 percent last month, with immigration-fueled population growth outpacing job creation over the past year.
The unemployment rate is up by a full percentage point over the past year, affecting all major demographic groups, particularly youth, as noted by Statistics Canada.
“Canada’s rapid population growth means we need this many jobs almost every month in order to simply keep up,” Stanford told the Toronto Star.
Porter expressed caution about the potential rate cut in June, acknowledging that the labour market data suggests the economy is not in decline.
"The Bank of Canada could take away the message that there’s no real urgency to cut interest rates because the economy is holding on," he said, while also emphasizing that longer-term trends indicate rising economic slack, according to the Toronto Star.
