BOC's Poloz: Confident New Entrants Coming To Labor Mkt

By Courtney Tower

     OTTAWA (MNI) - Bank of Canada Governor Stephen Poloz said Tuesday that

Canada's labor market, in a strong position even now, is on track to improve

further with younger people entering it and able to help manage the record high

household debt situation.

     Over much-publicized fears that rising house prices are making it difficult

to impossible for younger Canadians to buy homes, Poloz told a press conference

he was confident that home ownership possibilities "will turn out fine" despite

household debt being at record levels and risking financial instability in the

country.

      "We just need the labor market to become healthier," he said and he was

"confident" that this was coming.

     The reasons for confidence: Canada "is at the sweet spot, or sweet phase,

of the (economic) cycle," where the economy can be operating at full capacity

without causing inflation, he said.

     "I'm optimistic about it," he added. More affordable home ownership would

mitigate the high household debt levels, he indicated.

     Canadian unemployment is at a low-for-Canada rate of 5.8%, but the Bank of

Canada and Poloz have said often that it could and should go lower. Slack

remains in the labor market, they say, because young persons, and women, are not

in it as well as they should be. He was "confident that we're going to get more

of that entry" (young persons and women) into the market.

     Poloz had met reporters after speaking to the local Chamber of Commerce,

repeating the Bank's position that policy rate hikes will be warranted in an

undisclosed future but that they will be limited because the economy still will

need monetary stimulus.

     Poloz had made a point of noting that the present 1.25% policy rate is well

below the estimated neutral rate of 2.50% to 3.50%. This was occurring despite

the economy operating very near potential, when normally the BOC rate and the

neutral rate should be closer together.

     He attributed the dichotomy to a continuing hangover from oil price

collapse in the past, uncertainties about United States trade policy and NAFTA,

and competitiveness challenges faced by Canadian exporters.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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