Bank of Canada rate hike bets look ‘unrealistic’ given ‘sclerotic’ state of jobs market, say economists

In March, Canada's jobs market created 14,000 positions, while the unemployment held steady at 6.7 per cent. Photo by Mike Hensen/Postmedia files

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Canada’s economy remains sluggish as it added just 14,000 positions in March, doing little to reverse the “devastating” losses in January and February totalling nearly 110,000 jobs, economists say.

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The gain in March nearly matched economists’ estimates for an addition of 15,000, while the unemployment rate held steady at 6.7 per cent, matching expectations.

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Here’s what the March employment data could mean for the Bank of Canada, which announces its next interest rate decision on April 29.

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‘Important moving parts’: KPMG

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“Canada’s job market continued to look soft,” Ali Jaffery, chief economist at KPMG Canada, said in a note, adding that “underneath the hood of this report, there were several important moving parts.”

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For example, the jobless rate for people aged 25 to 54 — the core of Canada’s labour force — rose for the third consecutive month to 5.8 per cent, with this group having a harder time finding work.

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There was also lots of “noise” provincially, as British Columbia’s jobless rate rose 0.6 percentage points to 6.7 per cent. The last time it was that high, excluding the pandemic years of 2020 and 2021, was in February 2016. Ontario’s unemployment rate held steady at 7.6 per cent while Quebec’s fell to 5.4 per cent. Saskatchewan had the country’s lowest jobless rate at five per cent.

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Jaffery said the population count was “key” to the jobs report, estimating Canada averaged about a gain of 8,000 people per month during the first three months of 2026, a slowdown from a monthly average of 50,000 over the first six months of 2025. But he said the “sharply” contracting labour force likely drove most of the employment loss.

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He said the headline job numbers point to ongoing “moderate to material slack in the labour market,” making calls for rate hikes at the end of the year look unrealistic.

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“The Bank of Canada will see a labour market impacted by both soft demand and a structural decline in supply,” he said.

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He expects the Bank of Canada will hold rates at their current level of 2.25 per cent given the Middle East crisis and trade talks between Canada and the United States.

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‘Sclerotic’: Rosenberg Research

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“Suffice it to say that if there is one certainty, it is that the Canadian economy lacks a vibrant jobs market,” David Rosenberg, president of Rosenberg Research & Associates Inc., said in a note. “Sclerotic is more like it.”

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He said employment has “stagnated since last June” and pointed out there’s been a loss of 40,000 full-time positions over the past six months compared with an increase in part-time employment of more than 80,000.

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The jobless rate at 6.7 per cent is “lofty” and the employment-to-population ratio is stagnant, he said.

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In a possible turn in the credit cycle, Rosenberg pointed to the financial services sector letting nearly 20,000 workers go between February and March.