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What a mixed jobs report means for the Bank of Canada

Few reasons for the central bank to abandon its 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 exceeded expectations of a gain of 15,000 jobs, the outlook was not entirely rosy. Here’s what economists had to say about the report.

Douglas Porter, Bank of Montreal

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“Beyond the glowing headlines, the details were disappointing,” wrote Douglas Porter, chief economist and managing director of economics at the Bank of Montreal, in a note to clients after the data was released. Porter noted that while the drop in the unemployment rate was a surprise, it had more to do with a declining participation rate than with increasing jobs, most of which came from the part-time and/or part-time categories. public service. However, 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. “An increase in decent employment, a fall in the unemployment rate and persistent wage growth of 5 per cent are not reasons for an urgent call for rate cuts. “The Bank of Canada is likely to see this report as further reason to adopt 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 noting that January jobs data is often subject to seasonal distortions. Although the population increased by 126,000 people, there were only 18,000 net new entrants to the workforce.

“We would say this is not the type of report that makes us think the Canadian labor market is about to experience a new recovery,” Orlando wrote.

“The Bank of Canada will not change course after today’s report. The data is simply too volatile and does not offer a clear picture of the state of the Canadian economy. This keeps the Bank of Canada obsessed with the state of inflation.”

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Marc Desormeaux, Desjardins

The new population increase and steady wage growth in January caught the attention of Desjardins Group’s chief economist, Marc Desormeaux.

“2024 is shaping up to be a year of revenge: the 49ers against the Chiefs for the Super Bowl, Joe Biden against Donald Trump for the presidency of the United States and, according to current data, considerable demographic and salary increases compared to two percent of the Bank from Canada. cent inflation target,” he wrote.

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Desormeaux noted that population increases seemed to indicate continued demand for temporary workers, despite an overall weakening of the labor market.

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


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