Canada added 37.3K jobs in January compared to 15K expected. The unemployment rate fell to 5.7% from 5.9% as labor force participation also slipped.
"Although labour market conditions remain looser than they were a year ago, today’s data certainly won’t speed up the path to a first interest rate cut from the Bank of Canada," CIBC wrote after the report.
One caveat to the report was that it was tiled to part time jobs at +49K rather than full time at -12K with much of the jobs growth from government jobs. That's part of an ongoing trend:
"The number of private sector employees rose by only 7K, and has increased by only 1.6% on a year-over-year basis. That is in contrast to a 4.2% rise in public sector payrolls," CIBC wrote.
Another notable quirk is that population growth in the month was +125K, which has dragged the employment to population rate to the lowest since Jan 2022.
Some of these shifts explain why the loonie wasn't able to hold onto its initial gains on Friday.
CIBC maintained its call for the first rate cut to come in June but now sees the BOC ending the year at 3.75% compared to 3.50% previously. The current overnight rate is 5.00% and the first cut is 76% priced in for Jun with the market priced at 4.25% at year end.
"The unemployment rate isn't rising as quickly as previously expected given the generally sluggish trend in GDP, although a stabilisation or rebound in participation, combined with only modest employment growth, could still take the jobless rate above 6% by mid-year. That said, today's data confirm that the Bank won't be in a rush to cut interest rates, and we maintain our expectation for a first move in June. Given indications from today's data and previously released GDP figures that the Canadian economy is in somewhat better shape than previously expected"
