Canada and Global Economy Watch For The Week Ended Mar 10

All eyes were on Canadian employment which registered a 22K increase in February, marking a sixth consecutive monthly gain. The increase in February confirms that last month’s gains were not just a blip and that the labour market momentum remains strong in Canada. This gain was slightly above consensus expectations for a 10K increase. February’s jobs gains left the unemployment rate unchanged at 5.0%. The increase in employment stemmed from full time jobs (+31K) while the ranks of part-time workers decreased (-9K). Only the private sector registered a gain (+39K) while the public sector (-8K) and selfemployed people (-9K) registered a decrease.

Global equity markets finished lower on expectations the U.S. Federal Reserve Board (“Fed”) would keep raising interest rates amid relatively strong economic conditions. The collapse of Silicon Valley Bank into receivership also weighed on sentiment. In Canada, the S&P/TSX Composite Index declined, dragged down by the Health Care sector. U.S. equities, as measured by the S&P 500 Index, also fell. Oil prices fell over the week, while the price of gold was largely unchanged. Yields on 10-year government bonds in Canada and the U.S. moved lower.

Bank of Canada holds steady

• The Bank of Canada (“BoC”) held its benchmark overnight interest rate at 4.50%. For the first time in nine meetings, the central bank didn’t raise rates.
• The hold was widely expected as the BoC signaled its intention to pause interest rate hikes amid weakening economic conditions and slowing inflation.
• However, the BoC noted it would continue raising interest rates if warranted by economic conditions.
• With the BoC’s path diverging from the Fed’s, the Canadian dollar came under pressure after the announcement

North American labour markets proving resilient

• The Canadian economy added 21,800 jobs in February, which doubled estimates and helped push the unemployment rate lower to 5.0% from 5.1% in January.
• In the U.S., 311,000 jobs were added in February, also topping expectations of 225,000 job additions. With the participation rate ticking higher, the U.S. unemployment rate rose to 3.6%.
• ADP reported U.S. private businesses also added more jobs than expected in the month.
• Labour markets in North America appear relatively robust, which could keep the Fed on its rate-increase path and prompt the BoC to reconsider its decision to pause rate hikes.

Europe’s GDP growth stalls

• According to a final estimate, the European economy posted no growth (0.0%) in the fourth quarter of 2022, marking a slowdown from the 0.4% expansion in the third quarter.
• Europe’s economy was hindered by a drop in consumer and business spending.

• Ultra-tight financial conditions weighed on spending over the quarter.
• The European economy expanded by 3.5% in 2022, moderating from the 5.3% pace of growth in 2021.