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Canada's Jobs Slump in August Makes Bank of Canada Tightening Look Mispriced, Rosenberg Research Says

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Canada's weak August Labour Force Survey (LFS) is casting doubt on expectations for further Bank of Canada tightening, as employment fell by 41,700, sharply missing forecasts for a 15,000 increase, according to Rosenberg Research in a Tuesday note.

The decline in Friday's Statistics Canada LFS release ended a three-month streak of job gains and marked the steepest drop since February.

The weakness was broad-based, led by losses in services, while employment fell in half of Canada's provinces, said Rosenberg Research.

Easing employment and wage pressures weaken the case for aggressive BoC rate hikes, suggesting markets may be pricing in too many hikes, added Rosenberg. The data points instead toward a more cautious path for interest rates.

Full-time employment also declined sharply, while wage growth eased to 2.0% year over year in August from 3.0% in July, below the 2.9% consensus.

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