Canadian Unemployment Improves
Canada has published several important employment statistics this afternoon. The headline Unemployment rate is 6.9%, both consensus and prior readings were for 7%. The March Net Change in Employment showed a rise of 42.9k, this is an improvement on February’s fall of 7k and beats the anticipated change this month of 20k. Finally, the labour force Participation Rate has remained very steady at 66.2%.
The overall health of the Canadian economy is not in question, nor is its above average speed of recovery. This G8 nation looks well on course to beat it’s 2014 GDP growth target of 2.5%. Debt to GDP is in line with developed economy averages at 84.6% and inflation is stable just above the 1% level.
Canada’s real concern right now is the employment rate. There is a real reluctance for this to move much below the 7% level as has been evidenced by several attempts over the past 12 months. Unemployment is not a new phenomena to the Canadian authorities, if 4% is considered full employment then we have to look back to 1970 to see such a level. The Canadian economy, due to it’s unique demographics, appears to manage fine with unemployment running anywhere between 5% and 6%, so this is in reality the level that the authorities of the world’s 11th largest economy will be targeting.
The Bank of Canada is taking a hands off approach to the recovery process and this appears to be delivering some results, it has not altered the Benchmark Interest Rate of 1% since the middle of 2010 and by all accounts it does not have any near term plan to do so. The Canadian Dollar has been steadily depreciating over the last 24 months and this providing the necessary trade lead boost for the economy. The role of the Bank of Canada and the surest way to aid the unemployment situation will be to take whatever steps are necessary to ensure that the currency remains cheap for the foreseeable future.