Morning Market Brief: February 13, 2024

Canada’s labour market remains relatively tight 

Canada’s relatively strong labour market persists. Statistics Canada reported last Friday that the Canadian economy added more jobs than expected. Canada’s economy has seen job gains in six consecutive months. The resiliency in Canada’s labour market could push back plans by the Bank of Canada (BoC) to begin lowering interest rates. 

• The Canadian economy added 37,300 jobs in January, the most since September 2023. A Bloomberg survey of economists showed they were estimating 15,000 job additions. Job gains were concentrated in the part-time sector, which added 48,900 jobs, while full-time jobs fell by 11,600 in January.
• Canada’s unemployment rate edged lower to 5.7% in January from 5.8% in the previous month. This marked the first decline in Canada’s jobless rate since December 2022. Canada’s jobless rate continues to run close to its lowest level since the 1970s.
• Wage growth remained elevated in January. Average hourly earnings rose by 5.3% year-over-year in January, down from the 5.7% increase in December. Higher wages, due in part to a tight labour market, are contributing to elevated inflationary pressures.
• The BoC still appears poised to begin cutting interest rates this year. The lingering question for investors is when it will start. January’s relatively strong labour market report might push back the timing of interest-rate cuts.

While there were signs of the labour market cooling in 2023, it has continued to prove its relative resiliency. This has helped support Canadian consumer activity, despite ultra-tight financial conditions. Given the labour market’s importance in the BoC’s interest-rate decisions, markets pushed back their expectations for a rate hike to later in 2024. Markets appear relatively certain rate cuts are coming in 2024, but they can’t decide on the exact timing and how deep the rate cuts might be.

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