Canada surprises with 37,300 new jobs in January as wage growth slows

Canada's economy added net 37,300 jobs in January, beating expectations, while wage growth slowed slightly in the same month, data showed on Friday, figures that are likely to keep the Bank of Canada in a holding pattern despite pressure to start cutting interest rates.

Canada's economy added net 37,300 jobs in January, beating expectations, while wage growth slowed slightly in the same month, data showed on Friday, figures that are likely to keep the Bank of Canada in a holding pattern despite pressure to start cutting interest rates. The unemployment rate in Canada edged down to 5.7% from 5.8% in December, posting its first decline in 13 months, Statistics Canada said, mainly because fewer people were seeking jobs. The participation rate fell to 65.3% from 65.5% in December.

Analysts polled by Reuters had forecast net job gains of 15,000 and for the unemployment rate to rise to 5.9%. The average hourly wage growth for permanent employees slowed to 5.3% in the month from 5.7% in December.

The Bank of Canada (BoC) has kept its key overnight rate at a 22-year high of 5% since July, as it strives to bring inflation back to its 2% target. Money markets have been pushing back expectations for a first quarter-point reduction to borrowing costs, now seen as most likely in July, as the BoC warned of persistent underlying inflation, which was 3.4% in December.

"Today's data suggest that the Bank won't be in a rush to cut interest rates, and we maintain our expectation for a first move in June," said Andrew Grantham, an economist at CIBC Capital Markets. The central bank expects economic growth to remain soft in the first quarter of 2024 and expand by a modest 0.8% for the full year. Wage growth, which can fuel inflation, has largely been above 5% all of last year.

The Canadian dollar was trading 0.3% higher at 1.3425 per U.S. dollar, or 74.49 U.S. cents. The BoC closely tracks employment data to gauge the health of the economy and the year-over-year wage growth to keep a tab on changes in purchasing power.

Higher job gains or faster wage growth can affect the central bank's effort to sufficiently cool inflation and start lowering interest rates. January's job gains were led by part-time work, and entirely in the services sector. Largest job additions were in the wholesale and retail trade, followed closely by finance-related jobs.

The goods sector lost jobs, led by construction and manufacturing sector.

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