The Bank of Canada in July raised interest rates by 100 basis points in hopes of tackling high inflation.
Canada’s economy unexpectedly lost jobs for a second straight month in July after a boom year, but analysts predict that won’t stop the Bank of Canada from raising interest rates to combat inflation.
Statistics Canada on Friday reported that 30,600 positions have been cut while the unemployment rate is at a record low of 4.9%.
The data marks the second consecutive month of relatively moderate losses. From May 2021 to May 2022, the economy more 1.06 million jobs as the recuperation from COVID-19 has been kept.
Analysts polled by Reuters news agency had expected an increase of 20,000 positions and the unemployment rate to hit 5%.
The central bank Last month surprised the market by raising the main interest rate by 100 basis points in an attempt to tackle inflation and said more price hikes would be needed.
Derek Holt, vice president of capital markets economics at Scotiabank, said the July numbers were disappointing but predicted the central bank would continue to raise interest rates.
“I think they know well that fighting inflation is going to break a number of things, and one of them is going to slow down the job market momentum,” he said.
Average hourly wages for permanent employees – a number that the Bank of Canada closely tracks – rose 5.4 percent from July 2021, down from June’s 5.6 percent increase but strongly higher than the 2.4% registered at the beginning of the year.
“That should worry the Bank of Canada far more than the job numbers are evidence of a tightening market amid difficulties finding workers,” Holt said.
Statscan said there was no sign of an increase in employment despite the tightening labor market.
The United States, Canada’s largest trading partner, on Friday report The job numbers rose unexpectedly, helping to push the Canadian dollar 0.6% lower to 1.2945 against the greenback, or 77.25 US cents.
The next expected rate announcement from the central bank of Canada is on September 7, with the jobs data for August coming into effect on September 9.
Money markets have fully priced in a 50 basis point increase and have about a two-thirds chance of a 75 basis point gain.
“We are still dealing with the lowest unemployment rate in at least 50 years and wages are rising strongly,” said Doug Porter, chief economist at BMO Capital Markets.
“I don’t believe things are nearly weak enough to warrant a pause in rate hikes. We made the decision to raise rates by 50 basis points in September and I would say we were comfortable with that call,” he said by phone.
