• This note is part of a series that will be published after important data releases, documenting mechanical updates of the nowcast for Canadian GDP coming from the Scotiabank nowcasting model. The evolution of this nowcast will inform Scotiabank Economics’ official macroeconomic outlook. 

The model is described in a related note here

  • Canadian employers added a net +73K jobs in March, continuing to push the overall employment further above the pre-pandemic level. Coming on the heels of a massive +337K increase in February, the rise in March underscores that Canada is in danger of running out of people in the labour force. The unemployment rate has now declined to an all-time low of 5.3% in March, and Statistics Canada reported that employment gains in the last six months (+463K net jobs) far outpaced the increase in population aged 15 and above (+236K). With hours worked expanding +1.3% m/m in March, the Canadian economy so far shows no sign of slowing despite various risks, with the overall GDP growth nowcast for Q1-2022 edging higher to +5.10% Q/Q SAAR. This is significantly above the latest available forecast from the Bank of Canada, which is due to be updated next week.
  • Employment increases in March were dominated by a few key industries. In the goods sector, construction accounted for +14K net new jobs out of +31K total for the sector, consistent with strong construction activity in early 2022. Natural resources added approximately +9K jobs in the context of record-high commodity prices. On the services side, out of +42K net new jobs created in March, +29K came from the accommodation and food services, and others. Public administration added +12K.
  • As labour markets continue to tighten, we expect wage growth to pick up. Currently, average hourly wages are rising far below the rate of inflation (March: +3.4% y/y compared to +5.7% y/y increase in CPI). Wage growth is likely to strengthen further in the coming months, but it will likely lag inflation throughout 2022–23.
  • The labour market situation is further evidence of strength in the Canadian economy in early 2022. A series of blockbuster employment reports, albeit interrupted by bouts of pandemic-induced volatility, and high and rising inflation make the task of withdrawing monetary stimulus more and more urgent, increasing the likelihood that the Bank of Canada will raise the policy rate by 50bps next week.

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