Canada's unemployment rate dropped to bottom level since at least 1976
The current macroeconomic environment and the labour market situation build a strong case for the central bank to maintain its upward course with interest rates, according to RBC Economics.
“With (extremely) tight labour markets and above-target inflation, there is no reason for the Bank of Canada to leave interest rates at emergency low levels. We look for the central bank to hike rates next week to build on a 25-basis point increase in March, with a 50-basis point hike this time more likely,” RBC said.
Canada’s unemployment rate dropped to 5.3% in March, representing its lowest since at least 1976 and pushing the nation’s total job count to 442,000 posts higher than pre-pandemic levels, data from Statistics Canada showed.
The economy added an estimated 72,500 jobs last month, building on the massive upswing of 337,000 jobs in February.
Royce Mendes, head of macro strategy at Desjardins Securities, said that these gains “reinforce our view that the Bank of Canada will act forcefully next week to quell inflationary pressures.”
Read more: What will shape future home purchasing power?
Wage growth also increased from 3.1% to 3.4% annually in March, an indicator that the market is still wrestling with the lack of manpower, RBC said.
“With the unemployment rate so low, virtually all industries are bumping up against labour shortages, including those hospitality sectors that have yet to fully recover,” RBC said. “Business surveys have widely flagged that higher wages are expected to be necessary to attract additional workers.”
