December's jobs gain, beating estimates, in turn raises the odds of another interest rate hike later this month.
Economists said the unexpected good news for Canadian workers could delay the end of the Bank of Canada's dramatic rate hike cycle, which saw the central bank raise its key policy rate to 4.25% by the end of 2022.
The Bank's goal is to slow the economy and control inflation, and while it signaled last month that an end to hikes could be in sight, market watchers said Friday's strong labor force figures suggest another increase of at least 0.25% is now likely. (The next rate announcement is Jan. 25).
Another rate hike means at least a little more pain for Canadians with variable-rate mortgages and other loans. And it could fuel a worrying trend of rising personal bankruptcies: consumer insolvency filings rose more than 16% in November, the highest since the pandemic began.
Royce Mendes, head of macro strategy at Desjardins, said, "If the economy added anything close to 100,000 jobs in Dec. it means the labor market remains inconsistent with the Bank of Canada's target of reducing inflation to two per cent," Mendes said . . "So, it probably means the BOC needs to raise rates another 25 basis points later this month."