The Canadian employment report released on Friday showed weaker-than-expected numbers, with an unexpected  decline in net employment. Analysts at CIBC point out the weak headline figures may have the Bank of Canada questioning its apparent commitment to even higher interest rates but they noted numbers could rebound in the months ahead due to education employment. 

Key Quotes: 

“Summer lulling continued in the Canadian labour market, with a 40K drop in jobs marking the third consecutive monthly decline. However, unlike the prior two months, the latest drop can't be easily brushed aside as a consequence of reduced labour supply. Indeed, the participation rate actually edged up in August, meaning that the decline in employment took the jobless rate up to 5.4%, from 4.9% in the prior month. Yet with the decline in employment partly a result of a large drop in education, which often sees volatility in summer months, we doubt that today's weak headline numbers will change the Bank of Canada's commitment towards raising interest rates further.”

“The decline in jobs during August was focussed on full-time (-77k) and public sector (-28k) positions. By sector, a 28K drop in construction jobs (a sector previously booming) shows that interest rate hikes are having an impact on the labour market. However, the near 50K decline in education employment is more likely to represent difficulties in seasonal adjustments within this sector, and as a result we should see a rebound in the months ahead.”

“The weak headline figures may have the Bank of Canada questioning its apparent commitment to even higher interest rates. However, with the large drop in education employment potentially reversing ahead, and with one more labour force survey before the Bank's October meeting, it still seems likely that at least one more rate hike will be in store before a pause is seen.”