The March Labour Force Survey (LFS) confirms that Canada's economic situation remains "fragile in the currently highly uncertain economic climate, given trade tensions with the United States and, now, the geopolitical situation in the Middle East, which, if it becomes deadlocked, could plunge the global economy into a downturn, said National Bank of Canada.
The latter will put upward pressure on inflation in the coming months, particularly through higher oil prices, but in the bank's view, the Bank of Canada would be advised to exercise patience before raising interest rates.
In this uncertain environment, monetary policy doesn't appear particularly stimulative, as reflected in weak housing activity, moderate credit growth and the expected mortgage repayment shock in 2026, stated National Bank.
What's more, inflation was moving in the right direction before the oil shock and the bank isn't currently concerned about the acceleration in average hourly wages observed over the past two months; wages of permanent employees have risen 5.1% year over year in March and 4.2% in February.
Indeed, Statistics Canada has noted that, when controlling for composition effects, hourly wages of all employees rose by only 3.6%, the same level as in recent months. As a consequence, the headline wage uptick could be temporary, given that, in National Bank's view, the labor market remains in a state of excess supply.