Canada’s labor market remained resilient in April despite increasing recession fears. All key numbers released by Statistics Canada on Friday came in stronger than expected—maybe too strong for the Bank of Canada’s comfort as it tries to tame inflation.
The jobs report should raise the chance of a rate hike in June, yet we don’t think it will be as high as a half-percentage point.
The top-line net increase in employment was 41,400, driven mainly by services like trade, transportation and information.
Wages grew by 5.2% on a year-ago basis, unchanged from the prior month. We do not put too much emphasis on this number, though, because it was distorted by the composition of the data. Full-time employment—which includes workers with higher-paying jobs—dropped by 6,200 in April while part-time employment—those with lower-paying jobs—rose by a sharp 47,600.
Still, the strong jobs report should get the attention of the Bank of Canada as it weighs its next move in June.
While the data offers some sign that a soft landing is possible, it is important to keep in mind that the labor market often lags behind other indicators. Once the jobs market starts to deteriorate, it is often on a nonlinear path downward.
We maintain our forecast of a 60% chance that the economy will tip into a recession by year’s end. But with the new employment data, we still expect the next recession to be mild and brief.
