Experts say the latest Canadian employment figures from September are unlikely to change the Bank of Canada’s approach to interest rate policy going forward.
On Friday, Statistics Canada reported that the economy added 47,000 jobs during the month of September as the unemployment rate fell to 6.5 per cent. The latest employment figures will be considered by the Bank of Canada as it is widely expected to continue its easing cycle after cutting interest rates three times this year.
Earl Davis, head of fixed income and money markets at BMO Global Asset Management, said in an interview with BNN Bloomberg Friday that he doesn’t think the latest employment report will dissuade the central bank from cutting interest rates.
“The big reason why the Bank of Canada wants to ease is because of the mortgage renewals coming up in 2025 and 2026…the mortgage renewals going higher means there’s less disposable income in consumers’ pockets and they will spend less money. And that’s what the Bank of Canada is concerned about,” he said.
“The second reason why is the Bank of Canada says neutral interest rates are 2.75 (per cent). We are right now at 4.25 (per cent). So that means it’s still restrictive so they can ease aggressively to get to neutral without adding too much stimulus to the market because we’re still restrictive. So, for those two reasons, we still think they’re on their path towards much lower rates.”
Brendon Bernard, a senior economist at Indeed, said in an interview with BNN Bloomberg Friday that while full-time job growth increased, it’s important to factor population growth into the figures.
“One of the things we have to keep in mind about evaluating any labour force survey these days is that even a month like September where we saw (a) 47,000 increase in employment, the population grew by 110,000 in a month,” he said.
“So, the employment rate, that’s the share of the population with a job, actually slipped and it’s declined every month over the past year except one. And so, the September job numbers are definitely a bit stronger than we had seen over most of Q3 and Q2, (but) still not great though.”
In a statement to BNNBloomberg.ca Friday, Josh Sheluk, portfolio manager at Verencan Capital Management said he would “caution against drawing any high conviction conclusions” from September’s employment data.
“It’s not easy to estimate the jobs added across a country of 40 million people within 10 days of a month-end,” he said.
“In addition, in 2024, we’ve seen several instances of economic data diverging from the trend, only to revert to the trendline not long after. We will defer claiming that the weaker economic trend is over until we see more definitive and persistent data.”
Geoff Phipps, a trading strategist and portfolio manager at Picton Mahoney Asset Management, said in a statement to BNNBloobmerg.ca Friday that the employment data “surprised positively on a headline basis.”
“This report has the potential to allay concerns that the BoC (Bank of Canada) is behind the curve in its rate-cutting cycle, with today’s data being the last jobs release before the next rate decision on Oct. 23,” he said.
With files from The Canadian Press.