The Canadian economy added a meager 100 jobs in December and economists say weakening in the labour market increases the chance of a Bank of Canada interest rate cut in the second quarter of this year.

“The softening employment numbers and the rise in unemployment that we've seen over the past six or 12 months is moving things in the way of a cut,” Brendon Bernard, senior economist with jobs site Indeed, said in a Friday interview.

He made the comment after Statistics Canada released what he called “weak” employment numbers for the previous month.

Statistics Canada’s Labour Force Survey found that the country’s unemployment rate held steady at 5.8 per cent, slightly below the expected 5.9 per cent, according to the median estimate in a Bloomberg survey of economists. 

Meanwhile, the 100 jobs added were well off an expected gain of 15,000, following the addition of 25,000 new jobs in November.

Bernard said the numbers reinforce the expectation that the Bank of Canada will cut rates at their April 10 decision.

Employment numbers are among the many economic data sources the central bank is watching for signs that its rate tightening cycle, aimed at bringing down inflation, is successfully slowing the economy.

Bernard noted that Canada would need monthly job growth in the tens of thousands to keep up with population growth.

“To come in basically flat, it’s not a great sign,” Bernard said. “It didn't show up in the unemployment rate, which held steady, but that just reflects the fact that the labour force participation declined, so taking that all into account, the share of the population with a job declined.”

WAGE GROWTH STILL HOT

Tu Nguyen, economist with accounting and consultancy firm RSM Canada, said last month’s job figures make a rate cut in the second quarter of this year “imminent to avoid a downturn.”

Nguyen and Bernard pointed to strong wage growth of 5.4 per cent as a factor that may complicate the Bank of Canada’s decision, as the central bank may interpret that number as a sign of sticky inflation.

“That wage growth is maybe the fly in the ointment there,” Bernard said.

“But I think we're getting a sense that these wage growth metrics are really lagging developments elsewhere in the economy that probably follow the inflation numbers rather than lead them.”