By Ketki Saxena
Investing.com -- Today’s Canadian jobs data showed a 21k increase in employment in September, largely in line with economist expectations, after 3 consecutive monthly declines June through August.
However, jobs still remain down 92k from May, and much of the gains were driven by seasonal gains in the educational sector as students and teachers return to school. The 46,000 rebound accounting for all of the net gains in September, after accounting for all of the net losses in August. The unemployment rate meanwhile down to 5.2% in September from 5.4% in August, while wage growth grew 5.2% year-over-year, compared to 5.4% in August.
Douglas Porter , CFA, Chief Economist and Managing Director Economics at BMO (TSX:BMO), notes that “Most of the details were on the soft side last month”, believing that “On balance, it's clear that underlying job growth has cooled markedly—aside from the quirky education sector, jobs are down a touch since March.”
He reiterates however that “The key issue is whether the slowdown is nearly enough to stabilize wage and inflation pressures”, and that “Job conditions are certainly not cool enough to prompt the Bank of Canada to fully back off from its aggressive tightening campaign.” He is calling for a 50 bp hike at the BoC’s next meeting.
Marc Desormeaux, Principal Economist at Desjardins, points to the more positive aspects of today’s data in what he considers a “mixed” report. He notes that “The end of a three-month spate of job losses plus a lower unemployment rate are indicative of more tightness in the labour market. However, the softness in wage growth and ongoing decline in hours worked suggests the opposite.”
He also indicates that “Weakness in construction and financial services employment may mean that the housing market downturn has begun to spill over into other industries.”
Desormeaux believes the Bank of Canada will raise its policy rate by 50 bp this month, and that a further 25 bp hike in December is “Now on the table.”
Nathan Janzen, Assistant Chief Economist, RBC (TSX:RY) Economics also points to both the positives and negatives of today’s data. He stresses that much of the growth is seasonal, that wage growth has slowed marginally since August, and the unemployment rate higher than its record-low 4.9% recorded over June and July. However, he leans more towards the positives, noting that “Labour markets are still very tight. The unemployment rate is still low, and demand for workers is still very high.”
“That excess of labour demand versus available supply will limit the pace of further increases in the unemployment rate near-term, even as the number of job postings continues to slow, and will continue to add to wage pressures.”
He expects at least another 50 basis points in rate hikes this year.
James Orlando, CFA, Director & Senior Economist at TD (TSX:TD) focuses largely on the positives, writing "It is clear that the labour market in Canada remains drum tight.”
“The Bank of Canada is looking for a further softening in economic data before it can consider taking a breather on rate hikes. Given that the labour market has led the recovery over the last two years, this is one area where a greater recalibration is needed.”
He expects the Bank of Canada to raise its policy rate another 75 bps points thie year to 4% by year end.