The first significant economic report of the new year landed on Friday and it is raising speculation about the Bank of Canada’s next rate move.

Statistics Canada’s December employment numbers show nearly 91,000 new jobs were added for the month, nearly four times more than had been expected.  Most of the jobs (56,000) are full time.

The hiring boom dropped the unemployment rate to 6.7%, down from 6.8% in November.  The employment rate, which is the percentage of the population that is working, actually increased for the first time in two years.

The news is broadly seen as good, showing the Canadian economy is resilient and doing well as we continue to climb down from high inflation and other lingering effects of the pandemic.

Some market watchers are now suggesting the Bank of Canada may not need to make another rate cut at its next setting on January 29th.  They also point to the weak Canadian dollar, and signs that the U.S. central bank will slow its rate cutting plans, as indicators the BoC will pause.

However, a number of prominent Canadian economists point out that StatsCan’s employment numbers have a history of volatility, which make it difficult to base forecasts on a single report.  They also say the lingering threat of U.S. tariffs is weighing on business and consumer confidence, and lower interest rates could help counter that.

– First National Financial LP

-January 13, 2025