Economist calls into question if the central bank will maintain its "conditional pause"
The sustained robustness of the Canadian labour sector is likely to give the central bank cause to further contemplate its strategy for this year, according to veteran economist Sherry Cooper.
Citing the exceptional strength seen in the Canadian jobs report for January, Cooper said that the development calls into question just how long the Bank of Canada will maintain its conditional pause on its rate-hike campaign.
“This report showed no evidence that the labour market is slowing in response to the vast and rapid run-up in interest rates,” Cooper said in a new analysis.
With more than 150,000 new jobs added in January (a figure that surpassed most expert predictions tenfold), the employment rate has essentially returned to pre-pandemic levels, Cooper said.
“Employment rates among people 55 to 64 have been on a solid upward trend since the summer of 2022, mirroring the rise in employment over that period observed among most demographic groups,” Cooper added.
As immigration is slated to remain a major force in employment over the next few years, the BoC will have to take the segment into account as it approaches its next decision in less than a month’s time.
“The Canadian jobs market is showing no signs of slowing; this has to make the Bank of Canada at least a bit nervous,” Cooper said. “The US jobs market data in January was also robust, and the Fed chairman, Jay Powell, has offered assurances to markets that interest rates are likely to rise further.
“This is the last jobs report before the Bank of Canada meets again on March 8. The CPI data for January will be released on February 21 and will be the primary factor determining Bank action. If inflation continues to decline, as expected, the rate pause will hold.”
