All of a sudden -- if for only a moment -- Canada’s economy seems to be doing far better than the U.S.’s.
Despite the drag from more than a year of low oil prices and sinking business investment, Statistics Canada reported this week that the economy grew far faster in January than anyone had expected, expanding 0.6% — the fastest pace in five years.
CIBC’s chief economist, Avery Shenfeld, says this means Canada is on track to double the U.S.’s economic growth for the first quarter of the year. Shenfeld estimates Canada will grow at a roughly 3% pace in the first quarter, while the U.S. will come in around half that.
But most economists don’t expect this sudden strength to last, and Shenfeld says one big sign of this is the job market — it’s strong in the U.S., but soft in Canada.
Even as Canada’s economy boomed in January, the country lost between 5,700 and 10,000 jobs, depending on which measure you look at, and the jobless rate has climbed to 7.2%. What’s more, the agency says, wages are falling, down 0.7% from December to January.
Meanwhile the U.S. jobless rate hit an eight-year-low of 4.9% earlier this year, before climbing slightly to 5% in March. The U.S. has been averaging nearly 230,000 new jobs every month this year.
If Canada’s economy does come in stronger than expected this year, economists largely agree it will mean one thing: No more falling interest rates. A stronger economy will delay or even cancel any plans the Bank of Canada had to lower rates, and it could also mean interest rates will start rising sooner than expected.
