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Employment surprises to the upside in March

March jobs data “must be worrying” to the Bank of Canada

Canada’s economy continued to motor on in March with the creation of nearly 35,000 new jobs, once again beating economist forecasts.

Statistics Canada reported that 18,800 full-time jobs were created in March, along with 15,900 part-time positions. That beat the census forecast of 7,500 total positions for the month.

That also kept the country’s unemployment rate at 5% for the fourth straight month. Economists had expected it to tick up to 5.1%.

“The Canadian jobs market shows no sign of slowing,” noted James Orlando, a senior economist with TD Economics, adding that this is now the seventh month of employment gains, bringing the tally to 382,000 new positions in that time.

Not only is employment continuing to grow, but so too are wages. Statistics Canada reported a 5.3% annual increase in hourly wages in March.

“Continued labour market strength is boosting the incomes of Canadians, enabling them to increase their spending notwithstanding the high interest rate environment,” Orlando said.

What it means for next week’s Bank of Canada rate decision

“That is not the kind of growth the BoC wants to see when it is trying to ensure that inflation gets back to target,” he added. “Although today’s report isn’t enough to get the Bank off the sidelines, the fact that nothing so far seems to be able to crack the Canadian jobs market juggernaut must be worrying.”

But Marc Desormeaux, principal economist at Desjardins, said we shouldn’t read too much into the strong results given that the job gains were largely concentrated in specific industries, such as transportation and warehousing (+41k), business, building and other support services (+31k), and finance and insurance (+19k).

Both TD and Desjardins expect first-quarter GDP to come in at an annualized 2% and 3%, respectively, which is much stronger than the Bank of Canada’s current forecast of 0.5%.

“Nonetheless, we still think the Bank is most likely to continue to hold rates steady at next week’s meeting as it waits for the delayed effects of already completed hikes to arrive,” Desormeaux wrote. “After today’s report, we suspect that policymakers will keep the door open for more hikes down the road.”

The Bank of Canada’s next rate decision will take place on April 12, 2023.