Canada’s labour market experienced its sharpest downturn of the year in August, losing a net 65,500 jobs and pushing the unemployment rate up to 7.1 per cent, according to Statistics Canada. This marks the highest jobless rate since 2016, excluding the pandemic period, and adds to mounting pressure on the Bank of Canada (BoC) to respond with interest rate cuts.
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“The clearest signal that the job market has stalled,” is how Brendon Bernard, senior economist at Indeed Canada, described the latest data. Many economists now see stronger justification for monetary easing, although opinions vary on the pace and extent of potential cuts.
Desjardins Group economist Royce Mendes said the “ugly employment numbers” reinforce the case for immediate action. Desjardins expects a 25-basis-point cut at the BoC’s September 17 meeting, with further reductions anticipated to bring the policy rate down from 2.75 per cent to 2.0 per cent in an effort “to stem the bleeding in the economy.”
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CIBC’s Andrew Grantham also predicts easing, citing the job losses as a reason for a rate cut in September, with another likely in the final quarter of the year.
BMO chief economist Douglas Porter acknowledged the weak headline numbers but pointed to some underlying strength — notably a slight increase in hours worked — suggesting the economy may still post marginal growth in Q3. However, he agreed the report bolsters the case for further easing, while cautioning that inflation remains a concern. “The upcoming CPI report on September 16 looms large,” Porter said, as it lands just one day before the BoC’s policy decision.
Even RBC, which had previously expected no further cuts, admitted the August data had shifted the odds. Economist Claire Fan noted that the CPI figures will carry “an unusual amount of weight” in shaping the BoC’s next move.
Economists had originally forecast a modest gain of 10,000 jobs in August and a rise in unemployment to 7.0 per cent, making the actual figures a sharp and unexpected miss.
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