Canada: Labor market data for January is expected to weaken substantially – RBC CM

The Bank of Canada kept the interest rate unchanged this week but signalled imminent tightening at the next meeting in March. Next week, the key economic event will be the jobs report on Friday. Analysts at RBC Capital Markets see a drop of 70K in employment in January. 

Key Quotes: 

“Canadian labour market data for January is expected to weaken substantially. We’re eyeing a 75,000 drop in employment and an uptick in the unemployment rate to 6.4% after COVID-19 restrictions prompted business closures in large parts of the country.”

“Businesses in virtually all industries were reporting acute labour shortages just ahead of the Omicron surge, and are expected to be hesitant to let workers go as quickly as in past virus waves. For sectors unaffected by closures, high rates of absenteeism due to illness and self-isolation will weigh on total hours worked, if not official employment counts. Still, the number of available unemployed workers relative to the number of job postings is already very low—and that will likely still be the case once restrictions are lifted. Health experts are cautiously optimistic about the trajectory of infections in Canada.”

“Overall we do not expect Omicron disruptions to extend significantly beyond the first quarter of 2022.”