Canadian Jobs Data Shocks the Market! Will the BoC Raise Rates?

<p>&nbsp;Canada's employment data beat expectations by adding 63,800 jobs in September and wages also continued to rise, according to data released on Friday, increasing the chance for an interest rate hike.</p><p><br /></p><p>The unemployment rate remained at 5.5% for three consecutive months, Statistics Canada reported. Analysts polled by Reuters had forecast a net addition of 20,000 jobs and the unemployment rate would rise to 5.6% from 5.5% in August.</p><p><br /></p><p>Average hourly earnings for permanent workers increased by 5.3% from September 2022, up from an annual increase of 5.2% in August.</p><p><br /></p><p>“Today's jobs report really exceeded market expectations. Wage growth also exceeded market expectations,” said Michael Greenberg, portfolio manager for Franklin Templeton Investment Solutions.</p><p><br /></p><p>“Despite aggressive Bank of Canada interest rates, demand remains strong and companies continue to hire. This suggests that we will probably see another interest rate hike in November or December," Greenberg said.</p><p><br /></p><p>The central bank, which has raised interest rates 10 times in the last 18 months, has stressed that it will be difficult to fully control inflation if wages continue to rise at rates of between 4% and 5% a year.</p><p><br /></p><p>The seasonally and annually adjusted monthly increase in average hourly earnings for permanent workers was 8.3% in September, said Derek Holt, vice-president of capital markets economics at Scotiabank.</p><p><br /></p><p><br /></p><p>"Employee income is increasing rapidly," Holt said. "With wage data like this and the fact that we haven't had a temporary dip in core inflation measures in Canada like we have in the United States, I think we're still in the recovery phase in October."</p><p><br /></p><p>Financial markets increased bets for a rate hike later this month after the jobs data was published. They now see a roughly 38% chance of a rate hike this month compared to 28% before the data.</p><p><br /></p><p>The Canadian dollar eased slightly by 0.1% to 1.3718 per US dollar, or 72.90 US cents, as US jobs growth also beat expectations.</p><p><br /></p><p>Canada's 10-year bond yield rose 12 basis points to 4.255%, trading near a 16-year high.</p><p><br /></p><p>Canada's labor market remained strong even as the Bank of Canada raised its key overnight interest rate to a 22-year high of 5% to cool the economy.</p><p><br /></p><p>The Bank of Canada will make its next policy announcement and update its economic forecast on October 25.</p><p><br /></p><p>With strong gains in September, the average economy recorded monthly job growth of 30,000 this year, up from 25,000 a month earlier. Growth in part-time employment, which has outpaced growth in full-time employment this year, drove the increase in August with the addition 48,000 net positions in the month, Statscan reported.</p><p><br /></p><p>Employment in the service sector increased by 74,300 net jobs, mostly in education services, and outweighed the loss of 10,500 positions in the goods sector.</p>