Posthaste: Suddenly, economists are pushing back forecasts for the Bank of Canada's first rate cut

financialpost.com:

Good morning,

The latest numbers on Canada’s job market have moved the needle on when some economists think the Bank of Canada will make its first interest rate cut.

Labour numbers released Friday by Statistics Canada were unexpectedly strong, with a gain of 37,000 jobs that more than doubled forecasts.

That prompted some economists who predicted the first Bank of Canada cut in April to push back their forecasts until June.

“Although the sharp rise in employment in January may paint a healthier picture of the labour market than what is under the surface, the Bank of Canada will still be concerned about the renewed decline in the unemployment rate and the strength of wage growth,” said Olivia Cross, an economist with Capital Economics.

Capital economists and Desjardins Securities’ Royce Mendes both pushed back their forecasts for the first cut from April to June.

“The employment data suggests that June is now more likely for the first Bank of Canada rate cut of this cycle than April,” Mendes said in a report to investors.

There are several reasons why the data might concern central bankers.

First the unemployment rate isn’t rising as quickly as expected. In January it fell back to 5.7 per cent, the first drop in more than a year.

“For now, the labour market remains fairly tight,” said Toronto Dominion economist Maria Solovieva.

“The unemployment rate edged down, and remains low on a historic basis, and average hourly wage growth of 5.3 per cent year-on-year is still too discomforting for the Bank of Canada.”

A rise in hours worked also suggests a stronger increase in gross domestic product heading into the first quarter.

“Today’s data certainly won’t speed up the path to a first interest rate cut from the Bank of Canada,”