Unexpected jobs growth raises the possibility of another rate increase by the Bank of Canada

According to experts, the recent jobs growth increases the odds of another interest rate hike by the central bank during its next meeting on January 25.

The Statistics Canada report says the national economy exceeded economists’ forecasts by adding 104,000 jobs last month. As a result, Canada’s jobless rate went down to almost a record low of 5.0%.

Meanwhile, economists polled by Bloomberg expected 5,000 new positions and a jobless rate of 5.2%.

Andrew Grantham, executive director and senior economist at CIBC Capital Markets, believes this jobs growth may lead to another rate hike of 0.25% this month.

“The strong numbers increase the probability of another 0.25% hike at the next meeting, and it’s definitely a risk to our forecast,” – Grantham noted.

Although the December job growth exceeded economists’ forecasts, the Labour Force Survey wasn’t strong across the entire board.

The report says total hours worked rose by 1.4% from a year ago.

“Total hours worked, which affect the GDP more directly, were almost unchanged last month. In spite of the obvious hiring hike, the economy didn’t seem to be producing much more goods and services,” – said Royce Mendes from Desjardins Group.

Nevertheless, the next Consumer Price Index report and the BoC’s own business and consumer surveys, scheduled for release during the next two weeks, will also play a huge role in making that final rate decision.

The BoC will release its Business Outlook Survey on January 16, and Statistics Canada will release the new numbers on Canadian inflation and the Consumer Price Index on January 17.