Canada loses jobs for a second month, leaving door open for more rate cuts

THE CANADIAN PRESS/Adrian Wyld

The latest jobs report does nothing to alter the view that the Bank of Canada will lower interest rates further, after cutting in June and July.

Canada lost jobs for a second month in July and the unemployment rate held steady at 6.4 per cent, a weak report that should do nothing to change the central bank’s rate cutting bias. 

Employers eliminated 2,800 positions in the month, after a loss of 1,400 in June, Statistics Canada said Friday. The unemployment rate matched June’s 6.4 per cent, which outside of the COVID-19 pandemic is the highest since 2017. 

The Bank of Canada is expected to continue with its cycle of cutting interest rates, after the steepest tightening cycle in history. Policymakers led by Governor Tiff Macklem cut a quarter percentage point in each of the last two meetings, bringing the benchmark rate to 4.5 per cent. The next decision is Sept. 4. 

“The key takeaway is that employment has not grown in the past two months, the jobless rate remains almost a percentage point higher than a year ago, and it has been a really challenging summer job market for students,” Doug Porter, chief economist at the Bank of Montreal, said in a note to investors. “This backdrop doesn't increase the urgency of rate cuts, but it also does nothing to dissuade them.” 

Porter said he and his colleagues are now calling for a “steady diet” of 25 basis point rate cuts at each of the next four meetings, and the latest jobs report “lines up neatly with that view.”

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