The Bank of Canada will be in no rush to cut interest rates after Statistics Canada reported a larger-than-expected employment gain last month, economists say.
The federal agency’s labour force survey released Friday said the economy added 37,000 jobs in January after several months of relatively no change in employment.
Canada’s unemployment rate fell to 5.7 per cent last month, marking the first decline since December 2022.
“I would classify the labour market as tighter-than-expected, but not necessarily stronger-than-expected,” said Andrew Grantham, CIBC’s executive director of economics.
“That’s because, yes, employment continued to rise a little bit faster than the consensus expected. But it really paled in comparison with the big increase in population.”
Canada’s population of people aged 15 and older grew 0.4 per cent between December and January, far surpassing the 0.2 per cent growth in employment.
The labour market cooled significantly in 2023 as high interest rates weighed on consumer spending and business investment, pushing the unemployment rate up from 5.1 per cent in April to 5.8 per cent in December.
Brendon Bernard, a senior economist with hiring website Indeed says the unemployment rate, however, doesn’t give the full picture when it comes to the state of the labour market. That’s because it only measures the proportion of unemployed people among those who are actively looking for work.
Statistics Canada’s report emphasized the employment rate — which measures the proportion of the working-age population that’s employed — has been declining for four consecutive months, including in January.
“I think that’s probably a better barometer of the direction of the labour market,” Bernard said.
Even so, the relatively decent state of the labour market suggests to economists that the central bank can take its time when it comes to cutting interest rates.
“Today’s data is certainly not going