One economist says weaker than expected Canadian employment figures should be seen as regression to the mean ahead of the Bank of Canada’s upcoming interest rate decision.
On Friday, Statistics Canada released employment data for the month of February, saying employment was “virtually unchanged” from the previous month. Canada’s economy added only 1,100 jobs during the month, coming in significantly lower than expectations of around 20,000 among economists polled by Reuters.
“It’s a bit of a disappointment to see some weak numbers, but I think we need to also be putting them in the context of how strong the labour market had been over the past few months,” Charles St-Arnaud, chief economist with Alberta Central; and former economist, Bank of Canada, said in an interview with BNN Bloomberg Friday.
“We’ve had three consecutive months of very strong and surprisingly strong growth. So how much of today is just a return to normal and some kind of mean reversion rather than actually something that should be worrying.”
Tu Nguyen, an economist at RSM Canada, said in a statement to BNNBloomberg.ca Friday that the latest employment figures “stand in sharp contrast to the previous three months and highlights the toll tariff threats are taking on Canada’s economy.”
She also expects tariff threats to continue to weigh on Canadian employment figures.
“Tariff threats and the outcome of trade negotiations will likely continue to influence the job market in the months ahead. Expect demand for talent to fall if broad-based tariffs are implemented alongside a spree of other tariffs, including reciprocal tariffs in April,” she said.
Ahead of the Bank of Canada’s next key policy rate announcement, scheduled to take place next Wednesday, St-Arnaud said he expects a rate cut.
“I think it makes sense for the Bank of Canada to cut next week. We know, especially given the extreme level of uncertainty right now, it is not a business environment that is really helping investment or even consumers to be spending,” he said.
“We know the economy is going to be weaker just because of that extreme uncertainty. So, it makes sense for the Bank of Canada to start cutting now and can get ahead of the actual negative shock that we’ll see might come in April.”
