Canada crushes expectations, adding 150,000 jobs in January

Canadian employment grew much faster than expected, pointing to a labour market that’s showing few signs of cooling in the face of aggressive increases to borrowing costs.

The economy added 150,000 jobs in January — 10 times the median estimate in a Bloomberg survey — while the unemployment rate held steady at 5 per cent, near a record low, Statistics Canada reported Friday in Ottawa.

The report showed broad-based gains during what was a fifth consecutive month of job increases, bringing total employment gains since September to 326,000. The pace of job growth is accelerating — January’s figure was more than double that of December, which saw nearly 70,000 jobs.

Bonds tumbled on the strong print. The benchmark two-year yield soared to 4.13 per cent, up 16 basis points from Thursday, while the loonie rallied about 0.5 per cent to C$1.3381 per US dollar at 8:35 a.m. Ottawa time.

The numbers suggest Canada’s tight labour market is still running at an unsustainably hot pace, raising questions as to whether the Bank of Canada is really done hiking rates. The December figures, along with other stronger-than-expected data, prompted a final interest-rate hike by the central bank last month before policymakers declared a pause while they assess the state of the economy.

Governor Tiff Macklem, who raised benchmark borrowing costs by 425 basis points to 4.5 per cent in less than a year, has said he expects the lagged effects of higher rates to drag economic growth to close to zero in the first three quarters of 2023. At its last meeting, the central bank said it plans to hold borrowing costs constant, but could hike further if enough evidence of a hotter-than-expected economy accumulates. Prior to the release, markets were pricing a less than one in ten chance of another hike in March.

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