What a mixed jobs report means for the Bank of Canada, according to economists

Little reason for central bank to abandon patient stance

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The Canadian economy added 37,000 jobs in January and the unemployment rate fell to 5.7 per cent, according to figures released Feb. 9 by Statistics Canada. While that beat expectations of a 15,000-job gain, the picture wasn’t all rosy. Here’s what economists had to say about the report.

Douglas Porter, Bank of Montreal

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“Beyond the shiny headlines, the details were underwhelming,” Douglas Porter, chief economist and managing director of economics at the Bank of Montreal, wrote in a note to clients following the release of the data. Porter noted that while the drop in the unemployment rate was a surprise, it had more to do with a declining participation rate than the increase in jobs, most of which came in the part time and/or public service categories. Nevertheless, the report was strong enough to keep the Bank of Canada on pause.

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“Perhaps the key takeaway from this mixed report is that there are no obvious signs of stress for the economy, at least in these results,” he wrote. “A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts. The Bank of Canada is likely to view this report as further reason for a patient policy stance.”

James Orlando, Toronto-Dominion Bank

TD Bank’s James Orlando was also skeptical of the headline numbers, noting that the “underlying details were weak” and also flagging that January’s jobs data is often subject to seasonal distortions. While the population surged by 126,000 people, there were only 18,000 net new entrants into the labour force.

“We’d argue that it is not the type of report the makes us think the Canadian labour market is in for a renewed upturn,” Orlando wrote.

“The Bank of Canada won’t change course after today’s report. The data are simply too volatile and don’t paint a clear picture of the state of the Canadian economy. This leaves the Bank of Canada to continue fixating on the state of inflation.”

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Marc Desormeaux, Desjardins

The renewed jump in population and steady wage growth in January caught the eye of Desjardins Group principal economist Marc Desormeaux.

“2024 is shaping up to be a year of rematches: the 49ers versus the Chiefs for the Super Bowl, Joe Biden versus Donald Trump for the U.S. presidency, and according to today’s data, hefty population and wage gains versus the Bank of Canada’s two per cent inflation target,” he wrote.

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Desormeaux noted that the population gains seemed to indicate ongoing demand for temporary workers, despite an overall softening of the labour market.

“For now, we’re sticking to our call that the Bank of Canada will begin reducing its policy rate in the second quarter of 2024… But as we begin the new year, there’s no question that high population and wage growth still present upside risks to inflation.”

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