📝 Canada Jobs Data Show Growth Is Cooling, Conditions Remain Tight: BMO

The softness in Canada's jobs is particularly notable when stacked up against the robust U.S. gains last month—but note that Canada's jobs rebounded much more quickly initially (despite a much slower re-opening). U.S. payrolls only just returned to pre-pandemic levels in July (and the household measure isn't quite there yet), while Canadian employment is still more than 2% above pre-COVID highs.

Canada's job market is clearly losing momentum in a hurry, likely due to both a marked cooling in the broader economy but also because a lack of available workers. The downward drift in the participation rate, especially for the 15-64 group, is worth watching closely, with the potential to tighten the labour market further. For the Bank of Canada, the takeaway will be that while growth is clearly cooling, conditions remain drum-tight and wages are stirring. We believe this backdrop is consistent with another rate hike at the September meeting, but of a less aggressive nature than the mega 100 bp move in July. We look for a 50 bp hike at that time.

- BMO Capital Markets