The Canadian labour market gained 90.4k positions in April, with full-time employment up 40.1k and part-time employment up 50.3k.
The unemployment rate was unchanged at 6.1% and the participation rate rose 0.1 percentage point to 65.4%.
Employment by sector showed gains in professional, scientific and technical services (+26k), accommodation and food services (+24k), health care and social assistance (+17k), and natural resources (+7k).
Lastly, total hours worked jumped 0.8% month-on-month, while wage growth slowed to 4.7% year-on-year (from 5.1% in March).
Key Implications
What?!! Following March’s slight contraction, today’s big jump was more than 4x the consensus expectation. Even for this notoriously volatile data, this was a shocker. Our own Chief Economist’s immediate reaction was that “this is bananas!” Bananas indeed. This was the largest employment gain in 15 months. And with the cyclically sensitive private sector driving the increase alongside a huge jump in hours worked, it looks like second quarter GDP won’t have too much of a drop off from the above-trend expectation for the first quarter.
This report is likely to raise eyebrows at the Bank of Canada. The central bank has been looking for evidence that inflation will continue moving towards the 2% target. With the labour market showing renewed strength, there is potential for consumer spending to rise in the coming months, forcing inflation higher. This will be a concern for the BoC, which has seen this narrative play out in the U.S. over 2024. Financial markets have reacted, moving more decisively towards July as the start date for rate cuts (instead of June). We’d agree as this would give the BoC a little more time to ensure inflation remains on the right track.
