- Headline employment was up 107k in April – that was the largest increase in more than 40 years. The unemployment rate fell to 5.7% from 5.8% despite an uptick in the labour force participation rate
- Wage growth ticked up to 2.5% from 2.4%
The month-over-month headline employment swings are notoriously volatile – so there is reason to take even a 107k increase with a big grain of salt. But this is also not the first strong employment report we’ve seen for Canada. The employment count is up 426k from a year ago, for a whopping average monthly increase of 36k per month over that period. The typically more-stable unemployment rate dipped back close to cycle lows at 5.7% in April despite a tick up in the labour force participation rate. The soft spot in the labour market data remains wages, but year-over-year growth in average hourly earnings did tick up for a third straight month, rising to 2.5% in April from 2.4% in March. The recent drift higher is encouraging but the pace is still slower than would normally be expected with labour markets otherwise looking quite tight.
The Bank of Canada already knew that labour markets were looking solid when they moved sharply to the sidelines in terms of future interest rate hikes over the last few months. CPI inflation pressures still look quite benign and wage growth isn’t at a rate yet that would make the central bank worried about prices starting to move unsustainably higher. Household debt growth has still slowed and global growth concerns have not gone away with US and China trade tensions escalating once again this week. That should still leave the Bank of Canada with plenty of flexibility to hold off on interest rate hikes any time soon. The data also, though, continues to argue that a cut is at least as unwarranted at the moment.
