Posthaste: Canada's jobless rate seen topping 7% unless Bank of Canada cuts soon
Federal Reserve chair Jerome Powell caught the market’s attention this week when he said that inflation was not the only risk the United States is facing.
Speaking to lawmakers Tuesday, Powell said officials are becoming concerned about risks to the job market from higher interest rates after July 5 data showed the third straight month of rising unemployment.
“The latest data show that labour-market conditions have now cooled considerably from where they were two years ago — and I wouldn’t have said that until the last couple of readings,” he said.
It was the first acknowledgement in three years that the Fed is now paying as much attention to the slowing labour market as it is to inflation.
His testimony “wasn’t overly optimistic but it revived the expectation that a rate cut could come sooner rather than later, said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
Further north, the Bank of Canada could be facing a similar predicament.
Like the United States, Canada’s jobs data last week came in below expectations. The unemployment rate rose to 6.4 per cent and the economy lost 1,400 jobs.
Yet markets remain unconvinced that the central bank will cut again on July 24 mainly because inflation was hotter than expected in May, said National Bank economist Taylor Schleich.
“While the latest data wasn’t ideal, we don’t think it’s wise to miss the forest for the trees. Inflation today is much better behaved, while the labour market is gasping for air,” he wrote in a note this week.
Canada’s unemployment rate has risen 1.6 percentage points from its 2022 low, the largest increase in the G7 and 5th largest among OECD nations, said Schleich. If this trend continues National predicts the jobless rate could top 7 per cent
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