James Knightley, Senior Economist at ING, notes that the Canada’s jobless rate rose unexpectedly to 7.3% in February, with further falls in full-time posts, due to the widespread weakness in the country from the collapse in oil prices.
Key Quotes
“The unemployment rate in Canada ticked up to the highest rate in three years, highlighting domestic weakness in the economy due to persistent low commodity prices resulting in large layoffs in the resource sector, mainly in Alberta and Newfoundland. The oil story continues in Alberta, having reported its highest unemployment rate since 1995, at 7.9%. Up until last month, some losses have been offset by the service-heavy Ontario, however the region recorded a loss of 11,200 jobs in February.
Even with the worsening trend, the BoC have described the resilience and flexibility of the labour market as being encouraging, yet despite this, we think that the longer oil prices remain low, the higher the probability that there has been further widespread damage to the economy structurally.
Alongside the effect of any fiscal measures in next week’s Federal Budget (22 March) being incorporated to the next round of Bank of Canada (BoC) projections, the run of soft employment data will likely result in revisions to the BoC’s output gap estimates and help to argue a more dovish stance compared to last week’s broadly unchanged stance. Given the persistent upward trend in unemployment over the past two years and other softer indicators such as retail sales, we believe that there is a strong likelihood of a rate cut in the next meeting (13 April).”
(Market News Provided by FXstreet)
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