What the Bank of Canada can learn from a mixed report on jobs

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There is no reason for the central bank to abandon its patient stance

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The following are some of the ways to get in touch with each other: Canadian economy adds 37,000 jobsStatistics Canada reported that the unemployment rate in January fell to 5,7%. While that beat expectations of a 15,000-job gain, the picture wasn’t all rosy. Here’s what economists had to say about the report.

Douglas Porter, Bank of Montreal

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“Beyond the shiny headlines, the details were underwhelming,”Douglas Porter, Bank of Montreal’s chief economist and managing Director of Economics, wrote a note for clients after the release of these data. Porter stated that the surprise drop in unemployment was due to a declining participation rates rather than an increase in jobs. Most of these jobs were part-time or in public service. The report was still strong enough to keep the Bank of CanadaOn pause.

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“Perhaps the key takeaway from this mixed report is that there are no obvious signs of stress for the economy, at least in these results,”He wrote. “A decent job gain, a slide in the jobless rate, and persistent five per cent wage growth are hardly the stuff of an urgent call for rate cuts. The Bank of Canada is likely to view this report as further reason for a patient policy stance.”

James Orlando, Toronto-Dominion Bank

TD Bank’s James Orlando was also skeptical of the headline numbers, noting that the “underlying details were weak” and also flagging that January’s jobs data is often subject to seasonal distortions. Although the population increased by 126,000 people, only 18,000 net new workers joined the workforce.

“We’d argue that it is not the type of report the makes us think the Canadian labour market is in for a renewed upturn,” Orlando wrote.

“The Bank of Canada won’t change course after today’s report. The data are simply too volatile and don’t paint a clear picture of the state of the Canadian economy. This leaves the Bank of Canada to continue fixating on the state of inflation.”

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Marc Desormeaux, Desjardins

Marc Desormeaux is the principal economist of Desjardins Group. He was struck by the continued growth in wages and population in January.

“2024 is shaping up to be a year of rematches: the 49ers versus the Chiefs for the Super Bowl, Joe Biden versus Donald Trump for the U.S. presidency, and according to today’s data, hefty population and wage gains versus the Bank of Canada’s two per cent inflation target,”He wrote.

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Desormeaux noted the population gains as indicating a continuing demand for temporary workers despite a general softening of labour market.

“For now, we’re sticking to our call that the Bank of Canada will begin reducing its policy rate in the second quarter of 2024… But as we begin the new year, there’s no question that high population and wage growth still present upside risks to inflation.”

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‘ Credit:
Original content by financialpost.com. “What a mixed employment report means for Bank of Canada.”

Read the complete article at https://financialpost.com/news/economy/mixed-jobs-report-means-bank-of-canada

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