The Canadian jobs market continues to remain robust. Employment rose by 41,400 in April, while the unemployment rate held at 5.0% for the fifth consecutive month. Part-time jobs accounted for all of the monthly gains, as full-time employment fell (-6,200). Average hourly wages came in at 5.2% year-over-year, showing some moderation but still too hot for the Bank of Canada.
Population continued to expand, with the 15+ demographic growing nearly 70,000 per month in 2023. This rapidly growing population is pushing up monthly jobs numbers. The Bank has highlighted the population changes in its policy discussion. When reading the employment number, headline job growth is likely less important than the unemployment rate and wages to understand labour market tightness.
The Bank of Canada is concerned about the stickiness of service price inflation. This is likely the biggest challenge in getting inflation down to 2%. The Bank has highlighted three things it sees as necessary to slow service price inflation:
- The labour market needs to rebalance, and wage growth needs to moderate.
- Businesses need to slow the pace and size of their price increases.
- Inflation expectations need to come down—too many people still believe inflation will be higher than forecasts indicate over the next two years.
These factors will be a major determinant of whether the Bank of Canada will continue to sit on the sidelines, or if it feels it needs to do more to get inflation closer to the 2% target.
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