Canada’s January jobs report showed considerable strength in a number of areas; however, private sector economists’ forecasts got it completely wrong, as did the Bank of Canada, resulting in another hit to the central bank’s credibility, says a former chief economic analyst at Statistics Canada.
“They’ve had trouble with the labour markets throughout the last couple of years,” Philip Cross, an expert on the labour market and Munk senior fellow at the Macdonald-Laurier Institute, told The Epoch Times. “They’ve had trouble with inflation. Sometimes you have to be humble and admit you don’t know everything.”
Employment rose by 150,000—10 times more than the consensus forecast from economists—and the unemployment rate remained at 5 percent. The jobs created were mostly in full-time work, and the employment rate—the percentage of people aged 15 and older who are employed—rose to 62.5 percent, which is the highest since May 2019.
In its Jan. 25 monetary policy report, the Bank of Canada said, “Monetary policy appears to be slowing the demand for labour. Employment growth has been weaker in sectors that are sensitive to changes in the interest rate including manufacturing, construction, and trade.”
However, construction grew by 16,000 jobs and is one of the fastest-growing industries over the last 12 months. Oxford Economics pointed out that it led all goods-producing sectors in job growth in January, followed by manufacturing. Wholesale and retail trade led all service sector employment in January by adding 59,000 jobs.
Cross says the strong report is a result of both supply and demand factors—employers are concerned about worker shortages and are hiring more when they can, and people who are worried about their worsening financial situation are returning to the labour market.
He also said a warmer-than-usual January “seems to have helped boost the numbers a bit.”
Trending Higher, Not Lower
Bay Street economists were quick to say that the BoC will wait for more data before it decides that the economic outlook has markedly deviated from its assessment in January.
“The narrative can flip on a dime if the next print is deeply negative as can often happen with the wild Canadian jobs data,” says a Feb. 10 note from TD.
RBC said after the release of the jobs report that the Bank of Canada’s 4.25 percentage points of rate hikes are still making their way through to household and business debt payments, which will ultimately erode demand and push unemployment higher through to the end of the year.
“With record high participation and fewer unemployed Canadians to fill jobs, job creation is not sustainable at the current pace,” RBC said in a note on Feb. 10.
Statistics Canada also noted that the upward trend in total employment that started in September 2022 has resulted in a total of 326,000 jobs added.
