Canada: Some cracks appeared in the labor market but may not be enough for the BoC – CIBC
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Data released on Friday showed employment fell by 17,000 in May in Canada, against expectations of a 23,200 increase. Analysts at CIBC affirm that some cracks appeared within the Canadian labour market in May, but these “may not yet be wide enough to convince the Bank of Canada that inflation is about to meaningfully cool off.”
“The weaker-than-expected headline figure may have been exaggerated by youth employment, which can be volatile at this time of year. As such, we still forecast one more 25bp hike from the Bank of Canada by the September meeting. However, with past interest rate hikes continuing to cool demand within the economy, months of either weak job growth or modest declines will likely become more common in the second half of the year, seeing the unemployment rate move up further and helping to cool wage inflation.”
“Bond yields and the Canadian dollar weakened on the news that employment fell in May. However, the moves were fairly small in comparison to the gains seen after the Bank of Canada decision on Wednesday, and markets are still fully pricing in one more 25bp interest rate hike by September.”
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