Data released on Friday, showed the Canadian economy lost 200K jobs in January, more than expected. Analysts at CIBC point out most of the decline came from industries affected by tightening health restrictions and the numbers should not alter the plans of the Bank of Canada (BoC) of raising rates next month.
“The Canadian labour market failed to produce a positive surprise for the first time in a long time, with the 200K decline in jobs during January actually weaker than the consensus had expected (-110K). However, there was a good excuse, as most of the decline could be explained by job losses in services industries most impacted by tightening health restrictions at the start of the year. Because of that, today’s report shouldn’t alter expectations for a strong rebound upon reopening and also shouldn’t deter the Bank of Canada from raising interest rates next month.”
“The sharp decline in hours worked tallies with our expectation that monthly GDP likely saw a drop of close to 1% to start the year, setting the quarter up for a flat reading. That would be in contrast to the trend stateside, where fewer restrictions meant that employment and overall economic growth appear to have gotten off to a faster start. However, given the sector and provincial composition of today’s employment decline in Canada, we remain confident that jobs will return as restrictions continue to be lifted. We suspect that the Bank of Canada will feel the same way, and proceed with a rate hike in early March despite today’s weak figures.”