The Bank of Canada is expected to raise interest rates at the end of the month.
Canadian employers added more than 100,000 jobs in December, a strong number that suggests the tailwind from acute labour shortages was at least as strong as the negative effects of a spike in borrowing costs, plunging housing prices and worries about a global recession.
The Financial Post is part of Postmedia Network Inc. There was an issue with signing you up. Try again.
That is a good sign. When most of the headlines were negative, the economy created 381,000 jobs. The unemployment rate dropped to five per cent, one of the lowest readings on record, the hours worked increased, and the size of the labour pool increased.
JamesOrlando of Toronto-Dominion Bank was effusive. He told his clients that the surge in employment and rise in the labour force made this a positive print. The robustness of the numbers is supported by the fact that most of the gains were full-time jobs in the private sector.
It might be a little too strong for the Bank of Canada governor.
Data is always important The Bank of Canada doesn't know if it's raising interest rates enough to squash inflation, which jumped out of the central bank's comfort zone in 2021.
The central bank spent most of the year trying to cool the economy that it said was in "excess demand." The year-over-year increase in the consumer price index was 8.1 per cent in June, well above the Bank of Canada's target of 2%.
In response, policymakers pushed the benchmark lending rate ended the year at 4.25 per cent, a four-percentage-point increase from March, which was the most aggressive series of interest rate increases in the Bank of Canada's history.
Employers kept reporting that they were short of workers. Statistics Canada reported that they hired 104,000 people in January. Mainstream economists tend to associate full employment with a jobless rate of less than five per cent.
It is a sign of strength that full employment is a sign of inflationary pressures. Wage gains exceeded five per cent in seven of the last eight months, according to Statistics Canada. Wage demands tend to influence prices for goods and services and the Bank of Canada will see that as evidence of inflation.
Multiple forecasters published bleak outlooks at the end of 2022. The Bank of Canada predicts that growth will stall over the next few months, which could lead to a recession. Employment is aagging indicator, reflecting decisions based on economic conditions months ago, rather than foresight. The Canadian economy ended the year with a lot of steam.
The Canadian labour market remained strong through the end of the year, according to an economist at Indeed. The labour market's parade hasn't been affected by the clouds on the horizon.
For the first time in more than a year, policymakers said they would consider a pause when considering the interest-rate setting. Data from December and January will show if borrowing costs have peaked.
The inflation reading was not convincing. In October the headline rate was 6.9 per cent. The decline was positive and sluggish.
Strong hiring numbers suggest demand will continue to put upward pressure on inflation, which leads to higher interest rates Macklem said in December that he wouldn't sleep easily until inflation is back to 2%. Another interest-rate increase is likely this month.
The continued strength in employment means that the Bank of Canada isn't done yet, even though it has signaled it could go either way with its next policy decision.
The email address is kcarmichael@postmedia.
All Rights Reserved © 2024
