Canada’s latest Labour Force Survey for February signals a slowdown in job creation, reinforcing expectations that the Bank of Canada (BoC) will cut interest rates next week. The economy added only 1,100 jobs last month, a sharp contrast to the 211,000 jobs gained over the previous three months.
Despite the weak hiring data, the unemployment rate held steady at 6.6%, following modest declines in December and January. However, the broader trend shows that job growth is struggling to keep up with population growth, which could put more pressure on policymakers to ease monetary policy.
Mixed Employment Trends Across Sectors
The job market saw gains in wholesale and retail trade (+51,000) and finance, insurance, and real estate (+16,000). These industries have been expanding steadily in recent months, with retail bouncing back from a low point in mid-2024.
However, job losses in professional, scientific, and technical services (-33,000) and transportation and warehousing (-23,000) dragged down overall employment numbers. The transportation sector has now seen a 2.6% decline in employment over the past year, indicating potential underlying economic weakness.
Meanwhile, total hours worked fell by 1.3% in February, marking the biggest monthly decline since April 2022. This suggests that even those who remain employed may be seeing reduced workloads, another sign that the economy is slowing.
Tariffs, Trade Uncertainty, and Job Market Softening
Beyond the weak job growth, uncertainty around U.S. trade policies continues to weigh on Canadian businesses. With President Donald Trump reintroducing tariffs, industries reliant on cross-border trade are pulling back on hiring and bracing for potential disruptions.
This uncertainty isn't isolated to Canada. Recent U.S. job data also came in weaker than expected, and inflation pressures remain sticky south of the border, making it difficult for the Federal Reserve to adjust its own rate policy. As U.S. consumers cut back on spending, businesses may rethink hiring plans, which could have ripple effects on the Canadian economy.
Interest Rate Cuts Now More Likely
With the Bank of Canada’s next rate decision scheduled for March 12, financial markets are now pricing in an 85% chance of a 25-basis-point cut, up from 75% before the jobs report was released. The likelihood of another rate cut in April is also rising, with some analysts predicting the central bank could lower rates below 2.5% by the end of 2025.
For mortgage holders, lower interest rates could bring relief by making borrowing more affordable. If the BoC moves ahead with multiple cuts this year, variable-rate mortgage holders could see reduced payments, and new buyers may find it easier to qualify for financing.
What This Means for You
As the economic landscape shifts, it’s crucial to stay informed about how rate changes might impact your mortgage and borrowing power. If you have a variable-rate mortgage or are considering refinancing, now could be a good time to evaluate your options.
If you have any questions about how these changes might affect your financial plans, feel free to reach out—I’m always happy to help.
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