The latest jobs reports out of Canada and the United States on Friday both came with some surprises but also reaffirmed the view held by market analysts that additional interest rate hikes are coming later this month for both nations.
Canada’s unemployment rate rose to 5.4% in June from 5.2% in the previous month, marking the highest level it has been at in more than a year.
Meanwhile, employment rose by 60,000 during the month driven by gains in full-time work. This represented the largest increase in employment since January 2023 and was more than three times higher than the 19,000 jobs expected.
Across the border in the United States, however, fewer jobs than expected were added during June.
According to today’s non-farm payrolls report from the US Bureau of Labor Statistics, employment increased by 209,000 in June, a significant decrease from May’s 339,000 and below the consensus expectation of 225,000.
The unemployment rate was 3.6% in June, with unemployment ranging between 3.4% and 3.7% since March 2022.
But, while this economic data will be closely reviewed by the Bank of Canada (BoC) and the Federal Reserve, neither set of data is likely to motivate the banks to deter from their current rate hiking paths.
After raising the interest rate by 0.25% in June, the BoC is widely expected to raise the overnight rate by an additional 0.25% to 5% when it hands down its rate decision next week.
After this raise, it is expected that the BoC will hold rates well into 2024, according to a Reuters poll of economists.
In the US, the Fed hasn’t ruled out further interest rate hikes in order to bring inflation down to its target of 2%. It is expected the central bank will raise its benchmark rate to a 5.25% to 5.5% range at its July meeting.
ING chief international economist James Knightley said while this jobs report was softer than widely expected that the labour market remains too tight for the Fed to relax.
“A July rate hike is coming, but labor data is the most lagging of indicators and softer inflation next week could see rate hike expectations for further out moderate a touch,” Knightley said.
BKForex managing partner Kathy Lien also noted that this report would not change the course of the Fed. “The Fed is much more motivated by inflation which remains hot, and we have the CPI report [to come] next week,” she said.
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie