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Canada’s unemployment rate held at 6.5% in October as the economy added 15,000 jobs, Statistics Canada said Friday.

Analysts called for the unemployment rate to rise to 6.6% and for the labor market to generate 27,000 jobs.

Numbers provide a piece of the puzzle that Bank of Canada gather to decide whether to oversize the next expected interest cut with a second cut of 50 basis points (bps) or stay with the standard 25 bps.

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An inflation report due on November 19 and the next jobs report will help the central bank fill in the pieces at its next meeting on December 11.

Here’s what economists think October’s jobs data means for the Bank of Canada and interest rates.

“Not enough”: National Bank of Canada

“In October, employment growth was still insufficient to stabilize the ongoing deterioration in the labor market,” Matthieu Arseneau and Alexandra Ducharme, economists at the National Bank of Canada, said in a note.

The pair estimated that the economy needs to add 51,000 net positions, not 15,000, to keep the employment rate from falling further.

The measure is now down 0.1 percentage points to 60.6 percent, the sixth straight decline, and is 1.8 percentage points off its peak since 2023, economists said.

“While the employment rate is expected to decline amid an aging population, the speed of the recent decline signals a clear cooling of the labor market,” they said.

With the employment rate falling for the third straight time in the 25-54 age group and the youth employment rate remaining at lows not seen since 1999, barring the pandemic, Arseneau and Ducharme said there is no reason to celebrate the steady unemployment rate. stable.

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In addition, the Bank of Canada’s Business Outlook Survey said hiring intentions have retreated below their “historical average,” leaving the labor market flooded with workers as employers cut back.

“Overall, we remain concerned about further deterioration in the coming months as monetary policy remains accommodative,” the economists said.

The National Bank of Canada is calling for a 50 basis point cut in interest rates at the next Bank of Canada meeting.

Lots of head fakes: MonFX

“Employment data suggest that the labor market remains weak and the September figure was an aberration,” Nick Rees, senior foreign market analyst at MonFX Pte Ltd., said in a note.

There was a gain of 46,700 jobs in September, but Rees said fewer temporary jobs created over the summer resulted in fewer job losses, resulting in a “misleading” figure.

“With that in mind, last month’s print was soft and today’s reading is a continuation of that trend,” he said.

Rees believes the jobless number is also a sham, given that the participation rate of 64.8 percent — the lowest level since 1997, excluding the pandemic — kept the jobless number from rising to the 6.6 percent analysts expected.

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He also doesn’t think wage growth is as good as it seems, saying “composition effects” are at play.

Still, he is concerned that Friday’s jobs report could give the Bank of Canada pause on a bigger interest rate cut.

“Today’s data is likely to give the governing board pause and marginally raise the risk that they will fail to deliver another 50 basis point cut next month,” Rees said.

wars cut at 50 bps: Oxford Economics

Canada’s unemployment rate may have held steady in October, but the conditions are in place for it to rise above seven percent by early 2025, Michael Davenport, an economist at Oxford Economics Canada, said in a note.

“Canada’s labor market continued to weaken in October despite a steady unemployment rate,” he said. “Employment remained weak, strong population growth continued and discouraged workers left the workforce.”

Canada’s participation rate has seen a steady downward trend. At the beginning of 2024, it was 65.3 percent; in October it was 64.8 percent.

Davenport said the workforce could tighten as population growth reverses “as a result of recent significant reductions in federal immigration and temporary resident targets.”

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But he predicts there will be a lag before it shows up in labor force numbers.

Meanwhile, “we expect continued employment growth to help push the unemployment rate well above seven percent by early 2025.”

The Bank of Canada gets more labor data on Dec. 6 when the November jobs numbers are released. Third quarter gross domestic product will also be available for policy makers.

“But with inflation below the two per cent target, we think it’s likely that the underlying softening of labor markets and below the potential for economic growth will push the (Bank of Canada) to cut rates by another 50 bps in December,” he said .

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