Canadian employment growth slows in February, another rate cut by the Bank of Canada expected this week

In February, Canada’s job market showed little change, with only 1,100 new positions added. This marks a sharp contrast to the stronger gains recorded in December and January. The unemployment rate remained unchanged at 6.6%.

The figures surprised some analysts, who had anticipated continued growth following the notable increases of 91,000 jobs in December and 76,000 in January. Derek Holt, Scotiabank’s Chief Economist, pointed out that historical patterns suggested further expansion. RBC economists had forecast a modest rise of 15,000 jobs.

“The labor market’s momentum from recent months has stalled,” commented James Orlando of TD Economics. He added that “growing uncertainty around trade and policy may be starting to weigh on hiring activity.”

Douglas Porter of BMO highlighted the potential effects of the ongoing trade tensions with the U.S., suggesting that these issues are beginning to impact Canada’s employment landscape. “Beyond the monthly variations, it’s evident that the job market was on an upward trajectory in recent months… until trade conflicts intensified,” he observed.

Market expectations are leaning toward a 25 basis point (0.25%) reduction in the Bank of Canada’s interest rate this Wednesday, driven by ongoing concerns about trade disputes.

Porter noted that while the latest employment data contained “some noteworthy elements,” attention will quickly shift back to the broader implications of the trade war.

Orlando of TD stressed the need to monitor the labor market for any emerging weaknesses in the coming months. However, he pointed out that the job market “entered the current period of trade-related challenges from a position of strength, which is crucial given the economic headwinds.”

Orlando also expressed optimism that the Bank of Canada will proceed with a 25 basis point rate cut this week, aligning with market expectations.

The potential rate cut is likely to benefit both homebuyers, who are becoming more active as spring approaches, and homeowners looking to renew their mortgages.