Statistics Canada will be releasing the monthly jobs report this Friday. According to economists polled, Canada’s unemployment rate is forecast to rise to 5.6%. This marks a modest increase from the 5.4% registered in May.
The economy is forecast to add just 8000 jobs during the month of June.
Given the volatility with Canada’s jobs report, there is no telling whether we will get to see another blockbuster month.
But a beat on the estimates will no doubt make the BoC more confident as it looks to next week’s monetary policy meeting.
Having said that, there has been a recent uptick in Canada’s economy after a brief spell of a soft patch during the first quarter of the year.
Canada’s Jobless Rate Falls in May
The job numbers for June in Canada came out stronger than expected. The unemployment rate fell to 5.4% in May. This beat estimates of an unchanged print from April.
In April, Canada’s unemployment rate was at 5.7%. The decline in the unemployment rate marked a historic low for the Canadian economy and was at the lowest in 43 years.
The monthly employment change saw 27.7k jobs being added. This once again beat estimates that forecast just 5,000 jobs to be added. The total job gains over the past 12 months to 453,100 for the period ending May 2019.
Canada’s labor market remains the main driving force for the economy which was previously showing signs of a slowdown.
Last week, the latest GDP reports indicated that Canada’s economy rose 0.3% on the month in April. The data beat estimates of a 0.1% increase and continued from the 0.5% increase in March this year.
In fact, the GDP growth over March and April marked the biggest two-month growth in Canada’s economy since December 2017. The average hourly earnings rose to 2.55% on an annualized basis in May 2019.
BoC’s Business Outlook Survey – Employment
The Bank of Canada recently published its business outlook survey that was released last Friday. The survey showed that investment spending plans were healthy among firms. This potentially indicates a good sign for the firm’s expansion plans, which also leads to a higher workforce.
The investment spending plans come despite some anticipation of uncertainty due to the trade wars with the US and China.
Although Canada is largely out of the picture, the recent turn around by President Trump to use trade tariffs as a negotiating tool has kept firms on edge. Firms in the survey showed that although growth is expected in the coming months, it would be slower compared to that of 2018.
The intentions to increase employment were also healthy according to the business outlook survey. The firms that participated in the survey signaled that hiring would come across different sectors as well as regions.
Sales growth and production were one of the reasons that led to a positive outlook on hiring.
Most importantly, the future sales growth was also positive, although it remains at lows.
Impact of the Employment Report
Today’s employment report will have major implications for the Bank of Canada. The recent uptick in the GDP has complemented inflation staying at the BoC’s inflation target rate of 2.0%.
The data has shifted the expectations somewhat that there could be an upside risk for Canada’s interest rates. The BoC has held off from rate hikes, keeping interest rates unchanged for five consecutive months.
The BoC’s interest rates stand at 1.75%. While the BoC initially signaled that rates could move in either direction, there was a brief period where the markets expected a rate cut.
There are a lot more challenges than just the jobs report for the BoC. The central bank is due to meet in mid-July. While no changes are expected, a better than anticipated jobs report could change that perspective.