The Conference Board of Canada’s Chief Economist Craig Alexander offers the following perspectives/insights:
“Strong job creation and economic expansion in the first quarter of 2017 shows an economy with considerable momentum. With the weakness in business capital spending in recent years, the slack in the Canadian economy is being rapidly absorbed. Given this situation, the Bank of Canada might want to think about returning the overnight rate to its pre-commodity shock level of 1.00 percent before the end of the year,”
—Craig Alexander, Senior Vice-President and Chief Economist, The Conference Board of Canada.
- Canada posted solid job creation in March, lifting employment for the first quarter of this year to a net gain of 83,000 positions. The employment boom is consistent with an economy tracking 3.5 to 4.0 percent growth in the first three months of 2017.
- Given the slow pace of business capital investment in recent years, the potential pace of growth for the Canadian economy is below 1.5 percent. The implication is that slack in the economy is being eaten up quickly. While the Bank of Canada is not signally a rate hike at its next meeting, the economic data is building the case that a tightening of monetary policy is increasingly appropriate. Although the Conference Board of Canada base case forecast is for the Bank of Canada to hike rates in 2018, the incoming data suggest that before the end of this year the Bank of Canada should consider returning the overnight rate to the 1.00 percent level that prevailed before the oil shock.
- After months of surprising strength, the Canadian economy created a healthy 19,400 jobs in March, with the vast majority of the positions being full-time. The unemployment rate edged higher by 0.1 percentage point to 6.7 percent, but this reflected more people looking for work, signalling optimism.
- The details reinforced the view that the negative effects of the prior oil shock are abating. For example, Alberta recorded 20,000 net new jobs, all of which were full-time positions. And, the job creation was concentrated in goods-producing industries, with a gain of 21,800. Services posted a slim decline of 2,400, with education, transportation and health care posting the largest declines.
- The two negatives in the report were that self-employment drove the job gains in March, as private sector paid employment gains largely offset public sector employment losses, and wage growth remained soft at 1.0 percent year-over-year. Nevertheless, given the momentum in economic growth and hiring, wage growth should accelerate in the months ahead.