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Employment jumps by 90,000 in April, raising doubts about June interest rate cut

Canada's job market has cooled significantly over the last year
5/10/2024
grocery worker stocking shelves
Unemployment is up a full percentage point from a year ago.

The odds of a June interest rate cut from the Bank of Canada appear to have fallen after the latest jobs report from Statistics Canada showed employment jumped by 90,000 last month.

The jobs gain far surpassed forecasters' expectations and marked the largest employment increase in more than a year.

The jobless rate held steady at 6.1% last month.

The agency says the April employment gains were driven by part-time work.

James Orlando, TD's director of economics says the headline jobs number was a "real shocker" and that it "wasn't even in the realm of anyone's forecast."

The April employment gain was the largest monthly increase since January 2023.

The report comes as economists have been widely expecting the central bank to begin lowering its policy rate in June or July. The Bank of Canada has been particularly encouraged by progress made on inflation and has signalled that it's inching closer to a rate cut. 

But the latest employment numbers have made financial markets less certain an interest rate cut will materialize next month.

Orlando says waiting until July will give the central bank more certainty that it's not cutting interest rates prematurely.

"What that does is just gives the Bank of Canada just a little bit more time to make sure the current economic environment ... doesn't lead to more inflation," Orlando said. 

BMO chief economist Douglas Porter also sees Friday's (May 10) report giving the Bank of Canada "some pause," noting it's reinforcing the point that "the economy is clearly not rolling over."

But Porter said the bank may choose to focus more heavily on longer term trends, which suggest economic slack is rising. 

Population growth has outpaced job creation over the last year, which has pushed up the unemployment rate by a full percentage point.

Compared with a year ago, unemployment is up across all major demographic groups, with youth taking the largest hit, Statistics Canada said. 

The data showed employment in April increased in professional, scientific and technical services, accommodation and food services, health care and social assistance as well as natural resources. 

Employment fell in the utilities industry.

Wage growth slowed last month to an annual pace of 4.7%, down from 5.1% in March.

The Bank of Canada's next interest rate decision is scheduled for June 5. Its key interest rate currently sits at 5%, the highest it’s been since 2001.

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