On Friday, Macquarie economists said that the latest employment report from Canada deserves added caution.
The report, which showed a significant increase of 91,000 jobs in December, was primarily driven by hiring among older workers. This surge in employment led to a drop in the unemployment rate to 6.7%, which partly reversed the sharp increase observed in November.
The increase in hours worked, rising by 0.5% month-over-month, is seen as a positive sign that could bolster real GDP estimates for the fourth quarter of 2024 and the first quarter of 2025.
Despite this growth, Macquarie economists urge caution, suggesting that the employment report’s figures may have been influenced by seasonal adjustment challenges due to the timing of the data collection.
Furthermore, while the recent employment growth has closed the gap between the three-month moving average trend in employment growth and the breakeven level needed to keep the employment rate constant, the economists highlight that this adjustment was entirely attributable to the 55 years and older age group.
This demographic detail suggests that the labor market’s strength may not be as broad-based as the headline numbers imply.
In addition to labor market insights, Macquarie economists referenced their team’s Global Economic and Market Outlook in relation to the Bank of Canada’s future policy direction.
They predict that the central bank will implement four consecutive 25 basis point cuts per meeting, which would bring the overnight rate down to 2.25% by June 2025.
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