The labor market report released on Friday in Canada showed mixed numbers. The economy created 94K jobs in July, below the 177K expected. According to analysts at the National Bank of Canada the Bank of Canada (BoC) will take a cautious, wait and see approach to see how the Delta variants affects the economy and how the labor market continues.
Key Quotes:
“While the delta variant is surging globally, triggering investor anxieties, you wouldn’t know it from looking at the Canadian labour market. While the headline number fell short of consensus, another 94 thousand jobs were added in the month which is nothing to sneeze at, particularly coming off the heels of June’s massive tally. We’ve now fully erased third-wave layoffs and are just 246 thousand shy of Feb-2020 levels. However, it’s not just about recovering lost jobs as Bank of Canada Governor Tiff Macklem often notes. We need to get back to “where we should be”, accounting for jobs that would have be added absent the pandemic.”
“When it comes to comparisons to our U.S. neighbours, Canadian outperformance on the jobs recovery remained intact in July, even with the massive 943k print south of the border. Through July, US NFP employment sits 3.7% below pre-COVID levels, while in Canada the shortfall is just 1.4%. Even with momentum accelerating stateside, Canada looks better positioned to be the first to fully recover COVID-related job losses.”
“We’re betting the BoC will take the cautious, wait and see approach to better assess: (a) how the delta variant affects the global outlook and (b) if momentum in labour markets continues. As for policy rate normalization, we think our timeline for rate normalization is still on track for lift-off next July. By then, the output gap should be effectively closed, and judging by the recovery in labour markets to date, the modest jobs deficit should be fully absorbed.”
