And there could be even more on the way – soon

Tariffs are on. Then they’re off.  Then some are on and…well, you get the picture.  Despite all the nonsense that’s happening south of the border, and the economic mayhem it’s wreaking, there IS a silver lining for mortgage holders.

Canada’s latest employment data has raised expectations that the Bank of Canada will move forward with an interest rate cut at its upcoming policy meeting, as job creation fell significantly below economists’ projections.

Statistics Canada reported Friday that the Canadian economy added a mere 1,100 jobs in February, far below the anticipated 20,000. Despite this weak performance, the national unemployment rate remained steady at 6.6%. The modest job growth follows months of stronger gains, with February’s figures marking a significant slowdown that some analysts attribute to increasing uncertainty in trade relations with the U.S.

“This report reinforces the case for monetary easing,” David Rosenberg, president of Rosenberg Research & Associates told The Financial Post. “Odds of a rate cut at next week’s Bank of Canada meeting have jumped from 50% last week to 85% now.”

Employment stagnation was felt unevenly across industries. Retail and wholesale trade led job gains with an increase of 51,000 positions, while finance, insurance, and real estate added 16,000 jobs. However, significant contractions were seen in professional, scientific, and technical services, which declined by 1.6%, and transportation and warehousing, which saw a 2.1% drop. The latter industry has struggled over the past year, registering a 2.6% decline in employment since February 2024.

Public sector employment held steady, while self-employment saw little change. Hiring in the private sector, which had been growing in recent months, also stalled, indicating growing caution among businesses.

Economists suggest that Canada’s labour market may be reacting to mounting uncertainty surrounding U.S. tariffs. Nathan Janzen, assistant chief economist at the Royal Bank of Canada, noted that hiring in trade-sensitive sectors appeared to be slowing as businesses brace for potential economic disruptions.

“There are early indications that the heightened uncertainty from U.S. tariff policies and declining business confidence are impacting hiring decisions, particularly in goods-producing industries,” Janzen said in a client note.

The Bank of Canada’s upcoming decision mirrors a broader trend in North America, where central banks are weighing economic uncertainty against inflation concerns. In the U.S., Federal Reserve Chair Jerome Powell has signalled a cautious approach to interest rate policy, citing uncertainty over trade and employment figures. Although job growth in the U.S. remained steady in February, underlying concerns about inflation and tariffs have kept the Fed hesitant to cut rates too quickly.

Much like in Canada, U.S. markets have increasingly priced in the likelihood of interest rate reductions later this year. The Federal Reserve is expected to hold its benchmark rate steady in March, but financial markets anticipate at least one cut by mid-year if economic conditions soften further. The Bank of Canada’s decision will be watched closely as a potential leading indicator for broader monetary policy shifts in North America.

With the Bank of Canada set to announce its latest policy decision on March 12, market participants have increasingly priced in the likelihood of a rate cut. Money markets now reflect a 76% chance of a reduction in the benchmark interest rate to 2.75%, compared to 69% before the jobs report was released.

Data from the swaps market shows increasing confidence in further Canadian rate cuts later in the year. The probability of another cut in April has risen to over 90%, with expectations that the central bank could bring rates below 2.5% by the end of 2025 if economic conditions continue to weaken.

While the Bank of Canada has signalled a willingness to remain patient in adjusting rates, weak job growth and ongoing trade tensions could push policymakers to act sooner rather than later. With inflationary pressures moderating and economic momentum faltering, a rate cut next week is becoming an increasingly likely scenario.

“The weak labour market data, combined with the uncertainty around U.S. trade policy, leaves little reason for the Bank of Canada to hold off on easing,” said one market strategist. “Unless we see a sudden rebound in hiring, further rate cuts may be on the table in the coming months.”

For now, investors and businesses alike are closely watching the central bank’s next move, as interest rate policy remains a crucial factor in Canada’s economic trajectory for 2025.

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