Jobs numbers to slow BoC rate hike

“A slower pace of job creation means that our economy will take longer to reach its full capacity and that’s one of the key measures that Bank of Canada Governor Mark Carney uses when setting our interest-rate policy,” writes Dave Larock, president of TMG The Mortgage Group Integrated Mortgage Planners, in his weekly blog Monday. “I’d take a strong jobs report over a so-so one any day, but at least slower job creation makes it less likely that the BoC will raise its overnight rate (on which variable rates are based) anytime soon.”

Last week, the government underwhelmed Canadians with nearly negligible employment gains of 7,700 for May. Analysts had been expecting 10,000 jobs last month, building on impressive gains in April and March. The figures released by Statistics Canada also showed the unemployment rate holding steady at 7.3 per cent.

It’s not inconceivable that the jobless numbers could actually rise, with economists pointing to continuing troubles on the global front, including Spain’s march toward crisis.

Still, that uncertain future has increased the likelihood the central bank will hold its overnmight rate steady for at least the rest of the year, argue some analysts. For investors, it means the status quo is likely to stick around longer than initially predicted.

The current fixed-rate environment is also likely to hold, said Larock.

“Government of Canada five-year bond yields rose 22 basis points last week, closing at 1.29 per cent,” he writes. “The rally had no effect on our fixed-mortgage rates and, in fact, a few lenders actually cut their five-year fixed rates last week.

“A market five-year fixed rate now goes for about 3.09%, which still gives lenders a healthy margin and as usual, borrowers who shop around can do a little better.”

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