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Bank of Canada 50-bps-cut not a ‘sure thing’: Economists on the jobs numbers
The Bank of Canada’s decision to cut interest rates by 0.5% may not be as certain as previously thought, according to several economists.
CIBC Economist: "Weaker details" in September jobs report
Katherine Judge, an economist at CIBC Capital Markets, said that while the jobs report showed a strong gain of 47,000 jobs, there were also some weaker details. The number of hours worked fell by 0.4% from August, and the employment and participation rates pulled back as well.
Judge noted that the drop in the participation rate was a sign that workers are becoming increasingly discouraged in their search for a job. She said that while the jobs report wasn’t enough to make a 50-basis-point cut a sure thing in October, the upcoming CPI (consumer price index) report could still make that outcome possible.
Capital Economics: "Not as good as it looks"
Stephen Brown, deputy chief North America economist at Capital Economics, attributed the increase in jobs and the drop in unemployment rate to a seasonal quirk. The weaker summer jobs market for young workers meant fewer left positions than usual at the start of the school year.
However, Brown noted that the gains in private sector employment will be of special note to the Bank of Canada. Employment in this sector rose by 61,000 last month – a second consecutive increase. Year over year, it’s up by 193,000 or 1.5%.
Brown also highlighted that average hourly wage increases slowed to a 16-month low of 4.6%. He said that overall, the September Labour Force Survey reduces the chance of a 50-basis-point cut later this month.
Desjardins: "Won’t change our call"
Royce Mendes, managing director and head of macro strategy at Desjardins Group, said that despite the surprise job gains, there was plenty of evidence of labour force weakness to push the Bank of Canada to cut rates by a bigger amount. He noted that the decline in unemployment rate was due to a drop in the number of people working or looking for work.
Mendes also pointed out that population outran hiring in September, with employment up 1.5% year over year while those aged 15 and older in the workforce rose by 3.6%. He said that outside of the pandemic, that’s the highest level since 2017, and indicates growing slack among that more critical demographic.
Mendes retained his call that monetary policymakers will need to step up the pace of easing, citing gross domestic product for the third quarter is tracking at 1.2% annualized – well below the Bank of Canada’s forecast for 2.8%.
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