Canadian labour markets shows signs of firming in January – RBC Economics

Canadian labour markets surprised broadly on the upside for a second straight month in January, with employment rising solidly and the unemployment rate unexpectedly slipping lower, RBC Economics’ Assistant Chief Economist Claire Fan notes.

Unemployment rate is still up almost a percentage point from a year ago

“It is probably too early to give labour markets the all clear – the unemployment rate is still up almost a percentage point from a year ago and wage growth slowed to its lowest year-over-year rate since May 2022. But the unemployment rate may be closer to peaking (or have peaked) earlier than feared.”

“The BoC signaled following their January rate cut that further reductions would be contingent on economic data continuing to look soft so another round of firm looking labour market data reduces the urgency for the BoC to cut again in March.”

“Still, interest rates are at relatively high levels relative to a soft economic backdrop, household spending has shown signs of picking up, but business spending is still very soft. There remain significant risks that U.S. tariffs could be announced before the March policy meeting, and another round of labour market and inflation data still to be released before then.”