Bank of Canada April rate cut still in play as job market weakens

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Statistics Canada said on Friday that the unemployment rate in Canada has risen to 6.7% in March since January 2022, from 6.6% in the previous month.

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Last month, the economy gave up 33,000 jobs and analysts were missing an estimate of 10,000 jobs. However, their unemployment rate prediction is correct.

The unemployment rate remains below its highest high in November 2024, but Statistics Canada said the rate has been rising since March 2023, when it was higher than five percent.

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“The unemployment rate has been higher than the average of its pre-pandemic pandemics since March 2024 (from 2017 to 2019),” the agency said in a press release.

This is what economists believe the latest employment data means for the economy, Canadian banks and interest rates.

Work hard for full-time: Bank of Montreal

“March data” suggests: “The past two months have seen a widespread decline in business (and consumer) sentiment in actual decisions made last month,” Douglas Porter, chief economist at BMO Capital Markets, said in a report on Friday.

Full-time and private sector positions are the first to be hit, the former he calls the “heavy 62,000”.

Porter said that if the participation rate does not drop, the unemployment rate will increase even higher.

He noted that the increase in hours was a potential highlight, but he interpreted it as meaning employers asked people to work longer than payrolls.

Porter believes it is too early to attribute the losses directly to U.S. tariffs, especially since it was conducted before it came into effect on March 12.

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However, he does think the regional data tells the imminent impact of tariffs, which suggests job losses in Ontario, Quebec and Manitoba. Alberta also lost its position.

“Ultimately, we think Ontario has the greatest risk to U.S. trade protectionism, with its unemployment rising by 2 ticks to 7.5%,” he said.

He said he believes Canadian banks will want to see more data before implementing another tax cut.

Policymakers “cleared that” after lowered interest rates in March, and the only reason they did so was in response to U.S. President Donald Trump’s tariff threat.

“The falling energy prices and the end of the carbon tax will help relieve inflationary pressures,” Porter said. However, poorer employment and a sluggish stock market will “make the prospect of lowering tax rates very active in April.”

Currently, BMO calls on Canadian banks to cut tax rates further, “but we are talking about fluids.”

Higher unemployment rates on the way: Capital Economics

“In last month’s workforce survey, based on broad weaknesses does not bode well for the prospect,” said Bradley Saunders, a North American economist at Capital Economics Ltd., in a note, adding that the theory is supported by the survey, showing that the intentions for companies to hire are “sharp.”

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He said U.S. tariffs played a role in some job losses in March, attributed the decline of 7,000 manufacturing jobs to Trump’s trade routes and norms, but that’s just the tip of the iceberg.

“Although Canadian exporters may have escaped ‘liberation day’ without any loss, we still hope our tariffs will lose GDP growth, and we are hiring again this year,” he said.

Saunders points to automaker Stellantis NV’s decision to close its auto plant in Windsor, Ontario for at least two weeks, which will affect 4,000 positions, which will affect 4,000 positions because “evidence suggests that U.S. tariffs will pose uncertainty about the uncertainty that Canadian manufacturers are moving forward.”

Capital economics believes that the unemployment rate will rise to 7%, and economic weaknesses will force Canadian banks to lower interest rates as soon as the April 16 announcement.

“Great fluctuations”: Canadian RSM

“Trade uncertainty is causing a lot of work,” Tu Nguyen, an economist at tax consulting firm RSM Canada LLP, said in a note.

Canada’s employment in Canada “volatility” as employers add positions to lead the upcoming tariff storm.

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“But now that many tariffs have been met, the trend in the next few months is to layoffs and unemployment rates, as tariffs cause general economic pain,” she said.

Nguyen hopes this is especially true in wholesale and retail, manufacturing, especially in the trade-dependent sectors such as automotive production and steel and aluminum, which now has 25% auto tariffs as well as in the steel and aluminum sectors.

“The fatigue of macroeconomic and recession fears, including global recession, will lead to layoffs and delays in hiring across the sector,” she said.

Given the surprising level of unemployment in March, she said Canadian banks could be forced to lower rates by 25 basis points, which could be cut by 25% even if Canada missed the reciprocal tariff bullet.

•Email: gmvsuhanic@postmedia.com

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