Canada unexpectedly sheds jobs in July, central bank seen pausing hikes
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[August 05, 2023] By
Ismail Shakil
OTTAWA (Reuters) -The Canadian economy unexpectedly shed a net 6,400
jobs in July while the jobless rate ticked up to 5.5%, data showed on
Friday, cementing analyst expectations that the Bank of Canada will
pause its interest rate hike campaign.
Analysts polled by Reuters had forecast a net gain of 21,100 jobs and
for the unemployment rate to edge up to 5.5% from 5.4% in June. The
economy has lost jobs in two of the previous three months, Statistics
Canada said.
The labor market, supported in part by strong immigration, has until now
been resilient even as the central bank raised its key overnight rate
ten times since March 2022.
The Bank, fretting about inflation still well above its 2% target,
lifted rates in June and July and said it would study data closely
before moving again. It is due to make its next announcement on Sept. 6.
Money markets see a 28% chance of a rate hike in September, down
slightly from 32% before the data. Money markets see a 60% chance of
another rate hike by the end of the year, down from 80% before the data.
Doug Porter, chief economist at BMO Capital Markets, said there were
real signs the economy was starting to soften and noted the unemployment
rate had increased by six tenths of a percentage point since July 2022.
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"I think their (the Bank's) conclusion from this would be that it's
probably not a bad idea to pause on the rate hike front," he said by
phone.
The Canadian dollar edged down to C$1.3375 against the U.S. dollar, or
74.77 U.S. cents.
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![](../images/080523PIX/busine97.jpg)
A view of an illustration outside a wood
flooring sales office next to an employment agency in Toronto,
Ontario, Canada October 8, 2021. REUTERS/Chris Helgren/File Photo
![](http://archives.lincolndailynews.com/2023/Aug/05/images/ads/current/chicagostreet_quarter_FAIR_2023.png)
Royce Mendes, director and head of macro strategy at Desjardins,
said "today's data reinforce our view that the central bank is done
raising rates for this cycle."
While headline figures indicated some slowness, the average hourly
wage for permanent employees - a figure the Bank of Canada watches
closely - rose 5.0% from July 2022. That was higher than the 3.9%
annual rise in June, but lower than May's 5.1% and April's 5.2%
year-over-year increases.
Stephen Brown, deputy chief North America economist at Capital
Economics, said the jump in year-over-year wages was unlikely to be
sustained.
"The softer labor market data support our view that the Bank is
unlikely to follow through with current market pricing by raising
rates further," he said.
Including July's losses, Canada's monthly employment growth has
still averaged 22,000 this year, Statscan said.
The central bank has two more major data sets to ponder before the
Sept 6 rate announcement - July inflation, due on Aug 15, and second
quarter growth, due on Sept 1.
(Additional reporting by David Ljunggren and Dale Smith in Ottawa
and Fergal Smith in Toronto; Editing by Jonathan Oatis and Nick
Zieminski)
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