First National Financial LP®

Residential Market Commentary - Employment softens. Will the Bank of Canada?

  • First National Financial LP

Canada’s unemployment rate moved slightly higher in July.  Statistics Canada reports 6,400 jobs were lost and the jobless rate ticked up from 5.4% to 5.5%.  Analysts had expected an increase of about 21,000 jobs.

It is the third straight monthly increase in the unemployment rate and many market watchers see it as a sign the economy is slowing down.

The Bank of Canada has been trying to make that happen with its vigorous cycle of interest rate increases, in its efforts to bring inflation back down to its 2.0% target. 

Many analysts see the jobs report as a reason to expect the Bank to stand pat when it announces its next interest rate decision on September 6.  But they are qualifying their predictions, saying the Bank still has to see July’s inflation and economic growth numbers along with the readings for August.

Economists say, even if the Bank holds its trend-setting rate steady it will likely maintain its hawkish tone on the potential for future increases.

Coincidentally the U.S. job market also seems to be loosening up a bit.  Job growth there slowed in July with the addition of 187,000 new positions.  Expectations had been for nearly 210,000 new hires.  Employment gains for May and June have also been downgraded.

None the less, unemployment dropped slightly, from 3.6% to 3.5%. 

Like the Bank of Canada, the U.S. central bank has been hiking interest rates, to slow the economy, in a battle with inflation.