Canada’s latest employment report has significantly increased the likelihood of an interest rate cut by the Bank of Canada on September 17.
Statistics Canada’s Labour Force Survey (LFS) for August shows a loss of nearly 66,000 jobs for the month. That follows a drop of 41,000 positions in July. The August unemployment rate stands at 7.1%, up from 6.9% a month earlier.
Looking back to June, the Survey of Employment, Hours and Payroll (SEPH) – which is considered more reliable than the Labour Force Survey (LFS) – shows more than 32,000 jobs were lost; a significant reversal from initial reports of 83,000 jobs added for the month.
Most of the August loses came in part-time positions but had an inordinate impact on workers aged 25 to 54, which is an important demographic in the first-time homebuyer market. On-going trade trouble with the United States is getting the blame.
Employment plays an important role in the Bank of Canada’s interest rate decisions. Market watchers now say there is a better than 80% chance the Bank will cut its policy rate later this month. However, inflation is still the key factor.
“All told, this weak report fully reinforces any bias for the BoC to ease somewhat further here, but inflation hasn’t quite given them the all-clear,” wrote bank economist Douglas Porter in a newsletter.
The next inflation report is due September 16, one day before the Bank of Canada’s next interest rate setting.
Thank you to First National for the Market Commentary
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