Jobless numbers provide ammunition for further Bank of Canada rate cuts, say economists

financialpost.com:

The latest jobs data shows Canada’s unemployment rate continuing to rise, giving the Bank of Canada further ammunition to keep cutting interest rates, economists said.

Canada’s unemployment rate rose to 6.4 per cent in June from 6.2 per cent in May as the number of people looking for work increased while job creation remained “virtually unchanged,” with 1,400 fewer positions, Statistics Canada said, following Friday’s data release.

Analysts had expected 25,000 positions to be added in June and a slight rise in the jobless rate, to 6.3 per cent, according to Bloomberg.

The report pointed to several signs of economic frailty, including a drop in total hours worked — down 0.4 per cent month over month — “a negative signal” for June gross domestic product, Andrew Grantham, an economist at CIBC Capital Markets, said in a note. Meanwhile, the number of unemployed people hired in June was lower than in the same month in the three years prior to the pandemic.

Here’s what the economists are saying about the latest jobs numbers and what they mean for the Bank of Canada and interest rates.

“The sharp rise in the unemployment rate will have many questioning whether Canada has entered a recession,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note, adding that the jobless rate has risen 1.6 percentage points from its “trough” of 4.8 per cent in July 2022.

The “recession” question will take time to answer, he said.

Still, it’s clear that hiring “stalled” in June, as the number of unemployed people rose to 1.4 million, up 3.1 per cent from May.

Mendes said it’s “clear” that the Bank of Canada should cut at its next interest rate announcement and keep cutting at the September and October