As the April Canada unemployment rate remains steady, the Canadian economy was seen losing jobs in the month of April, with declines seen by a drop in the part-time workers. The weaker than expected data raised expectations that the Bank of Canada will be holding interest rates unchanged at its meeting this month.
Data from Statistics Canada showed on Friday that the Canadian economy lost 1,100 jobs during the month. This was well below forecasts which expected to see an increase of 17,400 jobs during the month.
The decline in the job growth came about with part-time workers shedding 30,000 jobs. This offset the increase of 28,000 in full-time jobs. On a sector basis the construction sector was seen losing 18,900 while the trade sector that includes the retail and wholesale jobs were seen losing 22,100.
The decline in the construction jobs was attributed due to bad weather in April and economists note that this could rise in the coming months. Professional and scientific services were seen rising 21,300 while the accommodation and food sector added 16,900 jobs during the month.
Canada’s unemployment rate was unchanged at 5.8%.
The average hourly wages were seen rising 3.3% on an annual basis in April. This was the strong pace of increase in earnings since January this year. The BoC, in its previous monetary policy meeting noted that it was closely watching the wage growth report, which is expected to give the central bank officials to justify a rate hike.
At the most recent BoC meeting, officials acknowledged that wage growth continued to pick up at a steady pace as expected but it was still watching the labor market for signs of any slack in the economy.
The data showed that full-time jobs were rising and this pointed to acceleration in wage growth which cements expectations of a potential rate hike in a few months’ time.
Based on the initial market reaction, economists note that the April jobs data is very unlikely to push the BoC to hike rates at this month’s meeting. Expectations currently point to a potential rate hike during June or July.
The gains in wages come amid regions such as Ontario and Alberta raising the minimum wage recently.
The Canadian dollar was seen giving up the gains and losing ground to the U.S. dollar immediately after the report. The expectations for a July rate hike was seen at 68% and could potentially mark a fourth rate hike from the Bank of Canada.
The next BoC meeting is scheduled for May 30 where expectations are high that the BoC will not hike rates at this month’s meeting. Currently, the probability of a rate hike stands at 40%.
The data came just a day after Canada’s inflation report showed that consumer prices rose 2.3% on an annual basis in April. The increase in consumer prices came with gains driven by higher gas prices. The April’s increase in inflation was the highest level in nearly three years.
The Bank of Canada is targeting the inflation rate of 2.0% and has raised interest rates three times so far. Gasoline prices were seen rising 17.1% with seven of the eight major components of the inflation data rising as well.
The BoC’s core inflation rate was little changed. The CPI common measure which is used by the Bank of Canada remained steady at 1.9% adding to the view that the central bank will most likely remain on the side lines at the meeting towards end of May.