Beware The Hype On Employment Data

First and foremost, Statistics Canada's monthly employment change data (as can be seen in the above chart) is notoriously volatile. So don't be expecting any major shift in Bank of Canada monetary policy based solely on the big jump in this number (plus 107,000) for April. 

Second, as can be seen clearly in the above chart, employment is a lagging economic indicator and tends to follow economic growth, not lead it.

If you want a clear leading indicator on the state of employment and economic activity, look at wage growth:

Wage growth has been in decline since the beginning of 2018. One of the hyped-up bloggers that was forwarded on to me (because I don't ordinarily read such) even suggested that wage growth was "spiraling" in his rant to get home-owners to lock in 5 year mortgage rates. Spiraling down perhaps.

If one were want to look closely at the employment data, head over to Statistics Canada's website. You will find that almost half of the increase (47,000) was in Ontario and "primarily due to gains in part-time work among people aged 15 to 24". In fact part-time work contributed 66,000 to the overall number.

The 32,000 growth in retail and wholesale trade, likely not earning much more than the minimum. How many are working more than 1 job to support record household debt levels?

The global uncertainties that are persisting because of the U.S. desire to continue to take a protectionist stance on trade will likely be the real drivers of economic activity for Canada and the Bank of Canada will be very much on guard for how that plays out.

The Bank of Canada's mandate is to create currency stability by monitoring inflation. There is certainly no wage inflation and the core (outside the more volatile products like food and energy) is stable. So there is little likelihood of a near-term increase from the Bank of Canada.

If locking in 5 year mortgage rates gives you peace of mind for cash flow purposes (can you get 3%?), then have at it, sleep better at night. However, because the yield curve is normally positively sloping (at least 80% of the time) variable rates will remain below 5 year rates over the long-term and that has proven itself, over time, to be the best way to borrow.