News Column

Rates kept low by limp job market: BoC governor

August 26, 2014

Bank of Canada Governor Stephen Poloz said the central bank has scope to keep interest rates near historic lows even if employment picks up.

Speaking in an interview last Friday in Jackson Hole, Wyoming, Poloz said persistent slack in the country's labor market and a tendency toward part-time job creation has restrained income growth in this country's economy.

The trend of employment growth "has been around 1% for some time," Poloz said. "We're confident there's quite a bit of room to grow."

Poloz's comments come less than two weeks before the Bank of Canada's next scheduled interest rate announcement on Sept. 3. Economists forecast policy makers to keep the benchmark rate at 1%, where it's been for almost four years, until very likely the third quarter of next year.

While Canada recouped job losses from the recession faster than its Group of Seven counterparts, job growth has stalled. Only 25% of jobs created over the past year have been full-time.

Poloz's remarks came on the same day U.S. Federal Reserve Chair Janet Yellen spoke about her dissatisfaction with improvements in the U.S. labour market.

Statistics Canada reported Aug. 15 that the country added 41,700 jobs in July.

While part-time work increased by 59,900 positions, full-time employment declined by 18,100.

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Source: Baystreet Economic Commentary (Canada)

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