Economists predict Bank of Canada will continue cutting rates despite strong jobs data

Canada’s Latest Employment Data Shows Weakening Economy, but Wage Growth Could Impact Rate Decision

Economists are closely analyzing Canada’s latest employment data, which indicates a weakening economy but also shows significant wage growth that could influence the Bank of Canada’s next rate decision.

According to Statistics Canada, the country’s unemployment rate rose to 6.2 per cent in May as 27,000 jobs were added to the economy. Additionally, Canada’s average hourly wage saw a substantial 5.1 per cent year-over-year increase, reaching $34.94.

Here’s what leading economists have to say about the recent labor market statistics:

Capital Economics’ deputy chief North America economist, Stephen Brown, expressed caution about the possibility of the Bank of Canada cutting interest rates in July despite the rise in the unemployment rate. Brown highlighted that while the headline jobs gain appears positive, the real growth came from part-time employment, particularly among younger Canadians.

TD’s managing director and senior economist, Leslie Preston, acknowledged the data supporting lower interest rates but emphasized that the economy has cooled without “falling off a cliff.” Preston anticipates a gradual pace of interest rate reductions throughout the year.

Chief economist at the Bank of Montreal, Douglas Porter, noted that the wage growth in May is concerning, but the underlying data’s additional slack could benefit the Bank of Canada. Porter emphasized that the recent robust U.S. payrolls report may influence the Bank’s decision-making process.

RBC’s assistant chief economist, Nathan Janzen, highlighted the importance of monitoring wage growth in the upcoming months. Janzen believes that despite positive economic indicators, the Bank of Canada can continue with its plan to loosen monetary policy.

Overall, while Canada’s economy is showing signs of weakness, the significant wage growth poses a dilemma for the Bank of Canada’s upcoming rate decision. Economists are closely monitoring the situation to determine the best course of action for sustaining economic stability and growth in the country.