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Analysts On April Labour Report [2/2]

CANADA DATA
Scotia think consensus is too bullish on rates whilst TD see a July cut as giving BoC a little more time to ensure inflation on the right track.
  • Scotia: “I maintain that consensus is too bearish on Canada’s economy and too bullish on rates with an underpriced curve relative to the US. Jobs offer the latest piece of evidence. Details point to strong underlying momentum in GDP growth that adds to inflation risk with a mild offset being mixed data on wages. We cannot dismiss such a gain as just white noise or sampling error. Folks who do so do it in cherry-picking fashion as I heard few saying not to worry about the prior month’s soft reading because it’s just statistical random noise when the upper half of that noise band might have indicated a gain. The 95% confidence interval around the change in employment in a given month is estimated by Statcan to be about +/-57k.”
  • TD: “This report is likely to raise eyebrows at the BoC. The central bank has been looking for evidence that inflation will continue moving towards the 2% target. With the labour market showing renewed strength, there is potential for consumer spending to rise in the coming months, forcing inflation higher. This will be a concern for the BoC, which has seen this narrative play out in the U.S. over 2024. Financial markets have reacted, moving more decisively towards July as the start date for rate cuts (instead of June). We'd agree as this would give the BoC a little more time to ensure inflation remains on the right track.”
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