The Canadian economy generated more jobs than anticipated in April, helping reduce market expectations for an imminent pivot toward easier monetary policy from the Bank of Canada. 90,000 new positions were added in the month and the unemployment rate held at 6.1 percent in March. Consensus estimates had pointed to 20,000 new hires, with elevated population growth and still-high participation rates pushing unemployment to 6.2 percent.
The services sector generated most of the gains, but gains were widespread, with professional, scientific and technical services, accommodation and food, health care and social assistance, and natural resources industries offsetting modest losses in the utilities segment. Total hours worked were up 1.2 percent year-over-year, gaining 0.8 percent in the month.
Several caveats were present: More than half the total – 50,000 positions – were added in part time roles. The average hourly wage for permanent employees – closely watched by monetary policymakers – fell to 4.8 percent from a year earlier, down from 5 percent in the prior month. This is sufficient to put upward pressure on services sector price measures, but suggests that slack in the Canadian economy is still growing. And the labour force grew by 112,000 people in the month, outpacing job creation.
The Bank of Canada still looks likely to leap off the starting block more quickly than the Federal Reserve this summer, cutting rates first, and easing more aggressively as the rate-sensitive Canadian economy underperforms its southern counterpart. But taken in combination with other releases showing a mild acceleration in growth, today’s data could limit the extent to which the central bank cuts borrowing costs over the next year, and could contribute to a more optimistic rhetorical stance from policymakers in the weeks and months ahead. Although this morning’s 50-basis point gain looks unsustainable, the Canadian dollar looks likely to ratchet higher as domestic growth expectations rise in tandem with a softening on the US side of the border.