Brokers worried stronger-than expected job numbers for December will spur the Bank of Canada into action may have it wrong, say economists, pointing to an otherwise sluggish economy and the continuing need for rate stimulus.
“I think the decline in the unemployment rate to a new cycle low 7.1 percent will catch (BoC's) eye," said Doug Porter, an economist at BMO Capital Markets, following the StatsCan release Friday. "But with inflation running at less than 1 per cent and GDP in the 1 per cent zone recently, I don’t think the Bank will be in any rush to do anything."
The analysis jives with the wait-and-see approach forecast by many bank economists as they sift through the tea leaves of last month's 40,000 job gain, most of it in Ontario.
That bumper crop defied economist expectations across the board, with Canada dropping a tenth of a percentage point off November's unemployment rate.
Economists had predicted no more than 5,000 positions added in December, many of them part time. That category actually declined by 1,400 jobs, with 41,200 new full-time placement stepping up to the plate.
The brighter economic picture is welcomed, say economists, but the overall economy continues to grapple with almost-stagnant GDP growth and the waning demand for oil as the global economy fends off recession.
The BoC is unlikely to bump up its overnight rate against that kind of backdrop, say market watchers.
It's good news for mortgage brokers bracing for a slowing real estate market and, at the very least, hoping the Central Bank will keep a low interest rate enviroment in place.
It will, wagers Porter,
But the jobs numbers means "they’ll keep a mild hawkish bias in place,” he said.