Canada: Strong hiring in August, but economy not fully healed – CIBC

The August employment report showed 90K jobs created in August in Canada. Analysts at CIBC point out the low numbers of new Covid cases and associated easing of restrictions clearly had an effect in continuing to allow for more employment in high-contact services sectors.

Key Quotes: 

“Summertime in Canada showed again just how strong hiring can be when there's a lull in Covid cases. The solid gains in August came at a time when US hiring slowed due to an earlier onset of the fourth wave. That said, even with today's headline employment increase, the economy seems like it's still a long way off from being fully healed. As a result, while the solid pace of hiring in August should give the Bank of Canada more confidence to taper asset purchases again next month, it's likely that the policy rate will need to remain on hold until late next year.”

“While the gain in August took employment to within 0.8% of its pre-pandemic level, hours worked were stagnant during the month. With that flat reading, hours worked remained 2.6% below its pre-Covid level and more than 4% below where its pre-Covid trend would have taken it.”

“The headline employment gain should nudge the Bank of Canada to taper its quantitative easing program again in October. However, with a fourth wave of the virus now here, at least some services sectors could give back part of the employment gains from this past summer. Moreover, other measures of the economy continue to suggest more weakness than the level of employment in the Labour Force Survey. As a result, Canadian central bankers will likely need to keep rates on hold until late next year to soak up all of the remaining slack in the economy.”