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Analysts Turn To Cut Timing After Labour Report

CANADA
  • CIBC: “We suspect […] job growth will continue to lag that of the overall population for the remainder of this year and into 2024, which will see the unemployment rate rise further and peak between 6-6.5%. That should help to ease wage and overall inflationary pressures, allowing for interest rate cuts to start in Q2 next year which will help the labour market to start recovering again in the second half of 2024.”
  • Desjardins: “Today’s jobs numbers were in line with our below consensus call. We see the economy entering recession in the not-too-distant future. As a result, we believe the next move from the Bank of Canada will be cut in the second quarter of 2024.”
  • RBC: “Signs of softening in labour markets should reinforce the decision to pause rate hikes for now and increase the odds that the next rate change will (eventually) be a cut. Our own base-case assumes the overnight rate will begin to move gradually lower in the second half of next year.”
  • BMO: “While the headline job gain was uneventful, make no mistake that the underlying picture for Canada's labour market is softening. Exhibit A on that front is the grinding rise in the unemployment rate, from a steady 5% level early this year to 5.7% now. While wages are responding only slowly to the cooldown, it is likely only a matter of time before they slow more meaningfully with headline inflation ebbing and job vacancies disappearing. This will keep the BoC pinned more fully to the sidelines, although we still believe that rate relief remains a distant prospect.”
  • TD: “Today's report gives the BoC some additional evidence that higher rates are working, even if it does not change their broader assessment of labour market conditions. Wage growth remains too high for the Bank's comfort.”…“Another round of tightening looks less likely after today's report, although it remains far too early for the Bank to start discussing easing.”
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