50 bps Bank of Canada rate cut 'seems more likely': Economists on the jobs numbers
November’s job numbers — the final piece of data the Bank of Canada is waiting on to help inform its interest rate decision next week — showed the economy gained 51,000 positions, well ahead of analyst estimates of 25,000.
The unemployment rate, meanwhile, jumped to 6.8 per cent from 6.5 per cent as more people looked for work. The forecast was for that rate to rise to 6.6 per cent.
Here’s what economists think the numbers mean for the Bank of Canada as it ponders its next rate move on Dec. 11.
Slack is continuing to build in Canada’s labour market, Michael Davenport, an economist at Oxford Economics Canada, said in a note.
Private-sector employment was unchanged last month, while hours worked fell for the third time in four months and average hourly wages grew at their slowest pace in two years.
Meanwhile, gross domestic product (GDP) is expanding below potential, he said.
These factors, coupled with inflation, currently at the Bank of Canada’s two per cent target, have Oxford expecting policymakers to cut rates by another jumbo-sized 50 basis points.
“With recent data providing conflicting information about the state of the Canadian economy, the jobs report was left as the tiebreaker ahead of next week’s Bank of Canada rate decision,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note.
He described the labour report details as mostly “good,” given that the gains, while in the public sector, were in education and health care, not public administration.
The economist doesn’t think there is cause to be overly worried about the rise in the unemployment rate, which rose “solely” because more people looked for work rather than lost their jobs.
“According to our calculations, the
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