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CIBC Economics

The labour market in Canada appears to be weakening again and because of that, we think that the Bank of Canada will return to interest rate cuts very soon. Even though the April employment numbers did show a slight increase in employment relative to the previous month, most of that was driven by the public sector and hiring that was related to the election.
Looking beneath that, we saw that sectors that are most at risk from tariffs and trade uncertainty, such as manufacturing and such as wholesaling, did show declines on the month. Looking forwards, what we will see is that continued weakness in manufacturing, wholesaling linked to trade and tariff disputes, and a pullback in hiring among the public sector.
Given those things, we do expect that the unemployment rate will rise above 7% in the coming months, giving the Bank of Canada plenty of reason to start cutting interest rates again. We continue to expect two twenty-five basis point cuts before the end of the year.

Could a cooling job market prompt the Bank of Canada to cut interest rates?

CIBC Economics

Andrew Grantham

Senior Economist

CIBC