Another month of surprise job gains reinforce Bank of Canada’s rate hold: economists

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OTTAWA — Another month of surprise job gains hasn’t changed many economists’ minds about softness in the Canadian labour market, but analysts weighing in Friday said signs of resilience should be enough to keep the Bank of Canada on the sidelines for the rest of the year.

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Statistics Canada said Friday the economy added 67,000 jobs in October, good enough to drive the unemployment rate down two tenths of a percentage point to 6.9 per cent.

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Economists polled by Reuters ahead of Friday’s release had expected the labour market would take a breather with a loss of 2,500 jobs in October, following a surprise gain of 60,000 positions in September.

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Job gains across October and September now more than offset sharp drops observed in August and July.

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Desjardins economist Kari Norman said the swings likely reflect a bit of volatility in the jobs data, but added economists are always happy to see their forecasts thrown off by surprise growth in the labour market.

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October’s increase was driven by part-time work with 85,000 positions added, coming off solid gains in full-time work in September. The private sector meanwhile added 73,000 jobs for its first gain since June.

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Average hourly wages were up 3.5 per cent annually in October, accelerating from 3.3 per cent the month before.

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TD Bank senior economist Leslie Preston leaned on baseball metaphors in a note to clients Friday, calling the back-to-back monthly job gains a “double.”

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“The labour market is proving a bit more resilient to trade tensions than we had expected, but October’s data is not a home run,” Preston said.

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While wages heated up on a monthly basis, Preston noted pay hikes have cooled from last year’s pace and the unemployment rate remains elevated in a still-soft hiring environment.

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The Bank of Canada will be parsing labour data closely as it prepares for its final interest rate decision of the year on Dec. 10, though the central bank will also get a look at November’s jobs figures before making that call.

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The bank’s benchmark interest rate stands at 2.25 per cent following a pair of consecutive cuts.

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Governor Tiff Macklem signalled last month that the central bank may be satisfied with where the benchmark interest rate stands unless incoming economic data strays from its forecasts.

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Norman said there’s little in the October labour force survey that would spook the Bank of Canada back into cutting mode.

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“Certainly, with the strong job numbers we got today, that’s not indicating a decline in the economy, which we’re glad about,” she said.

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“I don’t think that we’ll see another cut by the Bank of Canada this year.”

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Financial markets had the odds of a rate hold at the bank’s December decision at more than 81 per cent as of Friday, according to LSEG Data & Analytics.

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“Overall, today’s data is supportive of the Bank of Canada’s thinking that interest rates are now low enough to stimulate the economy, and we continue to forecast no more rate cuts from here,” said CIBC senior economist Andrew Grantham in a note.