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OTTAWA: Almost 6,400 Canadians unexpectedly lost their jobs in July as unemployment ticked up to 5.5% from 5.4% in June, data showed on Friday.
The latest statistics cement analyst expectations that the Bank of Canada will pause its interest rate hike campaign.
Analysts polled by Reuters had forecast a net gain of 21,100 jobs and for the unemployment rate to edge up to 5.5% from 5.4% in June. The economy has lost jobs in two of the previous three months, Statistics Canada said.
The labour market, supported in part by strong immigration, has until now been resilient even as the central bank raised its key overnight rate ten times since March 2022, Reuters reported.
The Bank, fretting about inflation still well above its 2% target, lifted rates in June and July and said it would study data closely before moving again. It is due to make its next announcement on Sept. 6.
Money markets see a 28% chance of a rate hike in September, down slightly from 32% before the data. Money markets see a 60% chance of another rate hike by the end of the year, down from 80% before the data.
Doug Porter, chief economist at BMO Capital Markets, said there were real signs the economy was starting to soften and noted the unemployment rate had increased by six-tenths of a percentage point since July 2022.
“I think their (the Bank’s) conclusion from this would be that it’s probably not a bad idea to pause on the rate hike front,” he said by phone.
The Canadian dollar edged down to C$1.3375 against the US dollar, or 74.77 US cents.
Royce Mendes, director and head of macro strategy at Desjardins, said “today’s data reinforce our view that the central bank is done raising rates for this cycle.”
While headline figures indicated some slowness, the average hourly wage for permanent employees – a figure the Bank of Canada watches closely – rose 5.0% from July 2022. That was higher than the 3.9% annual rise in June, but lower than May’s 5.1% and April’s 5.2% year-over-year increases.
Stephen Brown, deputy chief North America economist at Capital Economics, said the jump in year-over-year wages was unlikely to be sustained.
“The softer labor market data support our view that the Bank is unlikely to follow through with current market pricing by raising rates further,” he said.
Including July’s losses, Canada’s monthly employment growth has still averaged 22,000 this year, Statscan said.
The central bank has two more major data sets to ponder before the Sept 6 rate announcement – July inflation, due on Aug 15, and second-quarter growth, due on Sept 1.
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