Cracks in the Canadian economy are widening – CIBC

Canada employment chart March 2024

Canada’s jobs report showed a decline of 2.2K jobs in February, worse than the +25K reading expected. The headline is even worse than it looks when you consider runaway growth in Canadian immigration that led to a rise in the unemployment rate to 6.1% from 5.8%. That’s the highest since 2017.

“The cracks that had been slowly emerging within the Canadian labour market suddenly got much wider in March,” writes CIBC. “By sector, weakness in headline employment reflected declines in accommodation & food services and retail & wholesale, suggesting that the sluggishness in consumer spending is impacting hiring plans.”

They note that population grew by 91K in the month with the labour force up by 58K.

“With GDP expected to weaken in Q2 following the surprisingly strong start to the year, we would expect to see further softening in the labour market with the unemployment rate peaking close to 6.5%. However, interest rate cuts starting in June should bring a reacceleration in growth, which will help to stabilise the labour market in the second half of the year and into 2025,” CIBC writes.

The market is pricing in a 74% chance of a June 5 rate cut and 73 bps of easing this year.