A modest drop in employment coupled with a sizeable jump in the labour force drove up the unemployment rate two ticks this month, noted TD Economics in looking at the key implications of today's employment data for April.
Although the monthly data reflect a high degree of variability, the persistently elevated unemployment rate is reflective of a job market that continues to struggle to absorb labour supply, TD said. "In the coming months we expect the labour force increases to lose steam and help cap further rises in the unemployment rate," the bank added.
TD noted the economic outlook is "far from rosy" and the ongoing slack in the labour market is reflective of an economy that is still struggling to gain traction. "However, with the labour market still soft, the ability of firms to pass on cost increases from the inflation shock to consumers is more limited," it said, adding: "This is a key factor that underpins our view that if the sharp rise in oil prices begins to reverse in the coming weeks, the Bank of Canada will be able to stay on hold this year."