Unemployment rate likely rose in September, increasing odds of Bank of Canada hold
Unemployment rate seen rising to 5.6% in September, economists say
An expected uptick in the unemployment rate could prompt the Bank of Canada to hold interest rates again at its next policy meeting, as policymakers bet the labour market is loosening sufficiently to pull inflation down, according to economists.
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Economists from both the Royal Bank of Canada and Canadian Imperial Bank of Commerce forecast the jobless rate will rise to 5.6 per cent in September from the previous month’s 5.5 per cent unemployment rate.
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Statistics Canada is set to release the September employment data on Oct. 6, providing a look at how the central bank’s rate hikes are working to bring an overheated jobs market back into balance.
“We look for another tick up to 5.6 per cent in September with growth in the labour force … again outpacing that of employment,” wrote RBC economists Nathan Janzen and Claire Fan.
The unemployment rate has begun to rise, climbing to 5.5 per cent over July and August from five per cent in the spring.
RBC said it expects the economy gained 25,000 jobs in September. Labour markets have been absorbing new worker supply at a slower pace as demand moderates, it said.
CIBC, however, expects to see a more moderate 20,000 jobs created, half the pace seen in August, and more in line with weaker domestic demand.
This will compound the negative impact of mortgage renewals on consumption ahead, said CIBC economist Katherine Judge.
“The broader macroeconomic backdrop is continuing to soften,” Janzen and Fan said. Controlling for population growth, gross domestic product has contracted for four straight quarters on a per-person basis.
Judge added that annual average hourly wage growth is also predicted to cool, helped by a strong increase from last year dropping out of the annual calculation.
The RBC economists said “surprisingly firm” wage growth will continue to increase for unionized employees in particular, as contracts that were agreed to before the spike in prices are renegotiated.
“But we expect broader wage pressures will slow as the unemployment rate edges higher,” they said.
• Email: dpaglinawan@postmedia.com
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