The Canadian labour market has been a bright spot in an otherwise slowing economy and has defied the Bank of Canada's aggressive rate-hiking campaign that has lifted its benchmark rate to 4.5 per cent.
Statistics Canada reported on Friday that employers added 22,000 jobs in February, following two strong months of jobs growth. The unemployment rate held steady at the near-record low of five per cent and average wage growth reaccelerated to 5.4 per cent.
Bay Street economists weigh in about what this means for the Bank of Canada:
"The key concern for the Bank will be the rebound in average hourly earnings growth to 5.4%, from 4.5%. While that partly reflects unfavourable base effects, it still suggests strong earnings growth presents an upside risk to CPI inflation. ... With the low unemployment rate putting upward pressure on wage growth, the Bank of Canada will continue to stress that it may still need to raise interest rates further."
- Stephen Brown, deputy chief North America economist, Capital Economics
"There simply is no sign that the labour market is succumbing whatsoever to the rapid-fire tightening of the past year. We won't adjust our call on the BoC just yet, but the economy is likely just one wrong turn on the inflation front away from the Bank flipping back into rate-hiking mode."
- Doug Porter, chief economist, BMO Capital Markets
"Evidence is accumulating that the labour market is not following the Bank of Canada's plan for the economy. ... Markets will continue to price in high odds of another Bank of Canada rate hike after seeing these numbers."
- Royce Mendes, managing director and head of macro strategy, Desjardins
"The pace and breadth of job gains have been very firm at a time when they were expected to be slowing. ... Further stronger-than-expected economic data could still push the central bank to restart hikes, but we still expect the economy will slow more meaningfully going forward and for the BoC to remain in wait-and-see mode for now."
- Nathan Janzen, assistant chief economist, RBC Economics
"Although the BoC has been effective at slowing the parts of the economy most sensitive to interest rates, and it has seen inflation decelerate confidently, a more decisive turn is needed. Given that the BoC is in wait-and-see mode with its conditional pause, it believes that it is only a matter of time before a slowdown shows up in the broader economy. But with today's labour market report, it will have to wait a little while longer."
- James Orlando, director and senior economist, TD Economics
"The still historically low unemployment rate and strong wage growth will keep the Bank of Canada leaving the door open to future rate hikes, although we still don't think the data will be strong enough for policymakers to actually walk through that door."
- Andrew Grantham, senior economist, CIBC Capital Markets
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.