Canada cuts jobs for second month in a row, central bank sees rates rise

A help wanted sign at a store along Queen Street West in Toronto Ontario, Canada June 10, 2022. REUTERS/Carlos Osorio

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OTTAWA, Aug 5 (Reuters) – Canada’s economy suddenly shed jobs for the second month in a row in July after a year-long boom, but analysts predicted that would not stop the Bank of Canada from raising bonds. interest rate to fight inflation.

On Friday, Statistics Canada reported that 30,600 jobs had been cut while the unemployment rate remained at a record high of 4.9%.

The data marked the second consecutive month of relatively moderate losses. Between May 2021 and May 2022, the economy added 1.06 million jobs as the post-COVID-19 recovery took hold.

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Analysts polled by Reuters had expected an increase of 20,000 jobs and an increase in the unemployment rate to 5.0%.

Last month, the central bank surprised markets by raising its main interest rate by 100 basis points in a bid to fight inflation, and said more hikes would be needed. Read more

Derek Holt, vice president of financial markets economics at Scotiabank, said July’s numbers were disappointing but predicted Canada’s central bank would continue to raise rates.

“I think they know very well that the fight against inflation is going to break some things, and one of them will slow down the dynamics of the labor market,” he said.

Average hourly wages for permanent employees – a figure the Bank of Canada is watching closely – rose 5.4% from July 2021, down from June’s 5.6% year-on-year increase , but significantly higher than the 2.4% recorded at the start of the year .

“That’s going to worry the Bank of Canada much more than the job numbers as evidence of tight markets despite the difficulty in finding workers,” Holt said.

Statscan said there was no indication of an increase in job turnover despite the tight job market.

The United States, by far Canada’s largest trading partner, announced surprisingly strong employment figures on Friday. That helped push the Canadian dollar down 0.6% to 1.2945 for the greenback, or 77.25 US cents.

The next rate announcement scheduled by Canada’s central bank is September 7, with August jobs data due September 9.

Money markets have fully priced in a 50 basis point rise and see about two-thirds of the chance of a 75 basis point move.

“We still have the lowest unemployment rate in at least 50 years and wages that are solid,” said Doug Porter, chief economist at BMO Capital Markets.

“I don’t think things are weak enough to halt rate hikes. We had forecast a 50 basis point rate hike in September and I would say we’re comfortable with that call,” he said. he said over the phone.

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Additional reporting by Ismail Shakil in Ottawa and Fergal Smith in Toronto; Editing by Jan Harvey, Paul Simao and John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

David Ljunggren

Thomson Reuters

Covers political, economic and general news from Canada as well as breaking news across North America, previously based in London and Moscow and winner of Reuters Treasury Scoop of the Year.

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