Weak job growth and trade uncertainty raise expectations for a Bank of Canada rate cut on March 12
Canada’s job market remained nearly unchanged in February, with Statistics Canada reporting an addition of only 1,100 jobs, well below economists’ expectations of 20,000.
The unemployment rate held steady at 6.6 percent, as the country’s employment rate remained at 61.1 percent.
The weaker-than-expected job growth has increased speculation that the Bank of Canada may cut interest rates at its upcoming March 12 meeting.
Financial Post reports that David Rosenberg, president of Rosenberg Research & Associates Inc., said the probability of a rate cut has surged to 85 percent from 50 percent the previous week.
Financial markets, according to LSEG Data & Analytics, have leaned toward a quarter-point cut, while RBC economists see it as a close decision.
According to BNN Bloomberg, Assistant chief economist Nathan Janzen suggested the outcome could still shift based on developments before the announcement.
Employment in retail and wholesale trade grew by 51,000, while the finance, insurance, real estate, rental, and leasing sectors added 16,000 positions.
However, professional, scientific, and technical services saw a decline of 1.6 percent, while transportation and warehousing jobs fell by 2.1 percent in February and were down 2.6 percent year over year.
Harsh winter weather also had a significant impact, with 429,000 workers losing hours due to a series of snowstorms in Central and Eastern Canada. Total hours worked fell 1.3 percent, marking the largest monthly decline since April 2022.
TD Bank’s director of economics, James Orlando, described the weather as the “likely culprit” for the weak job numbers, though he also acknowledged growing concerns over impending US tariffs.
US President Donald Trump’s tariffs took effect on March 4, with some already adjusted and further trade measures anticipated.
The Canadian government introduced a $6bn support package to assist businesses affected by trade disruptions.
Nathan Janzen of RBC said uncertainty over US trade policies seemed to be affecting hiring decisions, with businesses exercising caution in trade-sensitive industries while employment in domestic service sectors grew, according to Financial Post.
The number of private-sector employees remained unchanged after gains in December and January. Public sector employment and self-employment also held steady.
Meanwhile, Canada’s manufacturing industry, which saw job growth in January, shed 4,800 jobs in February. Ontario, however, was an exception, adding 10,800 manufacturing jobs during the month.
According to BNN Bloomberg, Brendon Bernard, senior economist at Indeed, stated that the manufacturing sector remains a key indicator of the potential impact of tariffs on Canada’s economy.
While job losses in the sector have not yet materialized, Indeed’s data showed a seven percent decline in manufacturing and production job postings in February, suggesting a slowdown in hiring.
Andrew Grantham, senior economist at CIBC Capital Markets, suggested that February’s hiring stagnation, combined with the economic risks from trade tensions, could push the Bank of Canada toward another quarter-point rate cut.
However, RBC continues to predict a rate hold, with Janzen noting the decision remains evenly split
