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The week ahead is relatively quiet for major Canadian data releases, but industry reports will offer important signals about the economy’s momentum heading into spring.

Early signs from Statistics Canada’s advance estimates suggest wholesale trade for April on Thursday and manufacturing sales next Friday should show the sectors finding their footing after significant disruptions to motor vehicle production earlier in the year.

Early estimates showed March manufacturing sales rising 3.5%, lifted by the petroleum and coal product subsector as energy prices surged amid escalating Middle East conflicts, along with further recovery in the transportation sector. Separately reported data from the Industrial Product Price Index suggests about half the increase was due to higher prices, but that would still leave ‘real’ sales up about 1.7%.

This is significant, because the sector has been under pressure. As of February, manufacturing was still running below levels a year ago, weighed down by product specific tariffs on products like steel and aluminum as well as the motor vehicle sector. Yet, recent data points to a steadying trend. Both trade flows and manufacturing output have shown signs of stabilization, and U.S. tariffs have been broadly edging lower.

Wholesale trade tells a similar story. The advance indicator showed core sales (which exclude the price-related increases in petroleum and related products) rose 1.3% in March.

Housing data for April will also be released next week. Early results from local real estate boards show more sellers entering the market, with new listings reaching record levels in Montreal and Ottawa. Home resales rose month-over-month in Toronto (up 6.1%), Calgary and Edmonton, though remained weaker year-over-year in most markets. Buyers continue to hold stronger negotiating power in Vancouver and Toronto where ample inventory is sustaining price corrections—Toronto’s MLS HPI fell 6.5% year-over-year while Vancouver’s dropped 6.9%. The spring season has yet to deliver a clear boost to demand, with confidence constrained by trade uncertainty, job market concerns and affordability challenges.

South of the border, U.S. consumer prices data for April are expected to show headline inflation ticking higher to 3.8% year-over-year, driven by rising gasoline prices. Core inflation, which strips out volatile food and energy categories, is expected to remain more subdued, edging to 2.7% year-over-year.

U.S. retail sales are expected to tick up 0.5% in April, decelerating from the robust 1.7% in the prior month. Unit auto sales posted a decline in April following two consecutive months of growth, but that was offset by higher sales at gas stations due to higher prices.

U.S. inflation data are set to firm modestly in April, with headline CPI rising toward 3.8% year-over-year and core holding near 2.9%, reflecting energy‑related pressures spilling into food, services and some goods even as shelter inflation continues to cool. Retail sales, meanwhile, are likely to show headline growth of about 0.7% month-over-month, but largely due to higher prices rather than stronger volumes, pointing to steady but increasingly price‑constrained consumer demand. In the UK, growth appears to be cooling after early‑quarter strength, with Q1 GDP tracking around 0.5%, consistent with a slowing but still stable economy and reinforcing the Bank of England’s cautious, data‑dependent stance. In Brazil, inflation is picking up more decisively, with April IPCA inflation near 0.9% month-over-month and around 4.5% year-over-year, highlighting rising energy and food pressures that complicate, but do not yet derail, a still‑cautious path toward policy easing.

United States:

• CPI (Tuesday), Retail Sales (Thursday)

G10 Economies:

• U.K. GDP (Thursday)

Emerging Markets:

• Brazil CPI (Tuesday)

U.S. Week Ahead

CPI • Tuesday

April's CPI report will be more interesting than usual. The ongoing conflict in the Middle East has kept energy prices elevated, which will start to generate more obvious spillovers into other areas of inflation. We estimate headline CPI to rise 0.63% over the month, lifting the year-over-year pace to 3.8%.

Energy goods are poised for a 6% monthly gain as the jump in crude oil prices continues to pass through to the pump. Food at home is likely to accelerate after March’s pullback, with grocery prices set to strengthen later this year amid rising transportation costs and higher fuel and fertilizer input prices.

Excluding food and energy, we look for core CPI to increase 0.50% in April and 2.9% on a year-ago basis. The monthly pop is expected to be driven by core services, where strength will be partly—but not entirely—a mirage. The unwinding of a government shutdown-related survey quirk is expected to lead primary shelter to increase at twice its recent pace. We expect shelter inflation to quickly resume its moderation in May though, as real-time rent measures point to further softening. Excluding shelter, services should be genuinely hot thanks to higher jet fuel costs leading to a jump in airfares.

Meantime, a rebound in used vehicle prices will boost core goods inflation, though price growth for other core goods is likely to cool following March’s out-sized gains in apparel and recreational goods.

Looking ahead, we continue to forecast the year‑over‑year rate of core CPI to remain stuck close to 3.0% this year. Shelter inflation should continue to cool, but progress elsewhere is proving harder to come by. At the same time, slowing wage growth has weighed on consumer purchasing power and will likely limit firms’ ability to pass along higher costs. That should help temper broader inflation by year-end even as underlying pressures remain firm.

Retail Sales • Thursday

April retail sales data will be misleading at first glance as they will largely reflect higher prices rather than volumes. The data are reported nominally, thus not adjusted for inflation. While we forecast total retail sales rose 0.7% last month, after accounting for an around 0.7% gain in consumer goods prices, real retail sales were likely much weaker, potentially negative.

That's the signal we're getting from high-frequency credit card data, where spending outside gasoline collapsed last month (chart). While more volatile, the card data track decently well with the contours of retail spending.

The spending environment has ultimately grown more challenging as higher gas prices weigh on consumer purchasing power. Real household income, excluding transfer payments like unemployment benefits and social security, has trended lower and now turned modestly negative on a year-ago basis, signaling that compensation remains a key risk to households' ability to spend ahead. Consumers are saving less as a result to keep spending, and they're also relying on credit and/or their balance sheets. This all suggests a slower spending environment ahead.

G10 Week Ahead

U.K. GDP • Thursday

Next week brings the release of UK GDP data for March and Q1-2026. February growth surprised to the upside, with output rising 0.5% month-over-month (aside from manufacturing). For March, we expect GDP to contract by around 0.2%. That would still leave Q1 growth at 0.5%, in line with Bank of England (BoE) recent projections.

March PMIs were weak across manufacturing and services, reflecting softer sentiment and elevated uncertainty tied to the war in the Middle East. Construction was the exception, though that was supported by energy-related demand and a return to more typical weather conditions after February's unusually wet weather.

Against this backdrop, the BoE’s recent 8–1 vote to hold the Bank Rate at 3.75% struck us as broadly balanced with a slight hawkish lean. Greater emphasis on scenario-based forecasts highlighted optionality rather than a single outlook, while growth concerns partly offset inflation risks. As such, an upside GDP surprise next week would likely be treated cautiously, especially as anecdotal evidence suggests household and business activity may have been pulled forward, which could have boosted late‑March data and skewed risks to the upside. A weaker print would reinforce the Bank’s wait-and-see stance. That said, rising fertilizer prices and persistently high energy costs increase the risk of second-round inflation effects. We have therefore revised our Bank Rate outlook to include two hikes this year, up from a baseline of no changes. While uncertainty remains high and tied to developments in the Middle East, even with a rapid resolution, at least one hike may be needed to prevent second-round effects from becoming entrenched.

EM Week Ahead

Brazil IPCA • Tuesday

We expect Brazil’s April IPCA to rise a sharp 0.9% month-over-month, pushing headline inflation to around or slightly above the top of the target band at 4.5% year-over-year. Energy remains the key near‑term upside risk, with the Middle East conflict lingering and physical supply constraints becoming more binding, driving stronger pass‑through into refined products. Food inflation was already firming in March, and higher transport and fertilizer costs should broaden price pressures across food categories in coming months.

While core inflation remains restrained by restrictive real rates, administrative price smoothing and fiscal offsets, particularly in an election year, are adding upside risks to inflation expectations. Median 2026 expectations have risen to 4.9% from 3.9% prior to the US‑Iran war, per the Brazilian Central Bank's (BCB) FOCUS Survey. Against this backdrop, we think the BCB is likely to proceed with a cautious cut at the June meeting, but the outlook beyond that has become increasingly uncertain, with a pause in the easing cycle looking more likely.

Monday, May 11, 2026

Tuesday, May 12, 2026

Wednesday, May 13, 2026

Thursday, May 14, 2026

Friday, May 15, 2026

• Middle East headlines continue to dominate as hopes of deal grow.
• US CPI and retail sales data to fight for attention as Warsh takes office.
• UK Q1 GDP and BoJ meeting summary also on the agenda.

Markets Cheer Trump’s Peace Push Despite Threats

The late April surge in oil prices wasn’t met with the same risk-off reaction as at the onset of the Iran conflict, as the recharged AI rally eclipsed fears of a deepening energy crisis. Yet, the rise in inflation expectations was notable, and even as some of the worst fears have subsided, key metrics such as the US 10-year breakeven rate are above pre-war levels.

Investors are likely taking heart from the fact that inflation expectations globally remain some distance from the peaks seen immediately after Russia’s invasion of Ukraine. But there’s a danger they’re ignoring the real risk of the current energy crunch becoming the most severe in history. Crucially, the latest relief rally is founded mostly on hope rather than an actual deal between the US and Iran.

Although it’s accurate to say that President Trump’s rhetoric is more indicative of a desire to exit from the conflict than to inflame it, Tehran’s leadership structure has become more “fractured” in the President’s own words. Moreover, the Iranians are known to be tough negotiators, so even if the two sides can agree on a framework for a long-term deal that includes curbs on nuclear enrichment, the risk of re-escalation remains extremely high amid the battle over who controls the Strait of Hormuz and Israel’s repeated violations of its ceasefire with Hezbollah.

Even in the best-case scenario that the Hormuz Strait reopens soon, energy shortages could worsen before they get better, as it would likely take months for oil and gas flows from the Middle East to normalize. However, Iran negotiations are likely to take a backseat next week, as President Trump travels to China for a meeting with President Xi Jinping where trade will be top of the agenda.

Will the US CPI Report Matter?

Nevertheless, investors have scaled back some of their rate hike bets for the major central banks in line with the pullback in oil prices, with expectations for the Federal Reserve once again switching from hikes to cuts. The fluid situation in the Middle East means that the market reaction to the upcoming releases out of the United States, namely Tuesday’s CPI report, will be determined by whether there is any progress in the peace talks, or if Trump has ordered fresh strikes on Iran.

A major flare-up would increase investors’ sensitivity to upside surprises in the inflation data, while positive negotiations would reduce it, as any pickup would be considered temporary.

Headline CPI jumped to 3.3% y/y in March and likely accelerated further in April. The Cleveland Fed’s Nowcast estimate is a rise to 3.6% y/y, while core CPI is seen staying unchanged at 2.6% y/y.

Producer prices for the same month are due the following day on Wednesday. The PPI report quite often tends to negate some of the effects of a CPI surprise if they’re contradictory. But if both sets of figures are hotter-than-expected, risk appetite is likely to be knocked back as Fed rate cut bets would take a hit, with next week’s busy schedule of Treasury auctions potentially exacerbating any spike in US yields.

Warsh Confirmation Awaited

Also guiding the Fed policy direction next week will be possible comments by Fed chair nominee Kevin Warsh, who looks set to be finally confirmed by the US Senate on Monday, just days before outgoing chair Jerome Powell’s term is set to expire on May 15.

Investors have largely welcomed Warsh’s nomination, as he’s likely to make the case for the need to cut rates further. But any explicit hints about the types of reforms he has in mind could spook markets.

Thursday’s retail sales numbers for April will also be vital, amid some worries about whether US consumer spending will hold up against a backdrop of rising gasoline prices. Other data will include existing home sales on Monday, and the Empire State manufacturing index and industrial production on Friday.

Dollar’s Resilience Tested by Yen Intervention

The US dollar’s losses on the back of the optimism of an end to the Iran conflict have been relatively modest and would have been even less if it wasn’t for the intervention in the yen by Japan’s government. But despite Fed rate hike bets diminishing, a resumption of the dollar’s 2026 uptrend isn’t on the cards either, as Japanese authorities are suspected to have remained active in the FX market following the April 30 intervention.

The yen’s best prospect in the short term is to attempt a dash toward the 152-per dollar area, which twice acted as resistance earlier this year. Such a boost could come from the Bank of Japan’s Summary of Opinions of the April meeting due to be published on Tuesday.

There were three dissents at the meeting, as the hawkish voices grew louder. If the summary reveals that other board members could soon join the calls for an imminent rate hike, the yen could enjoy improved demand other than from central bank buying.

Pound Bulls Tread Carefully

For the pound, whose own rebound against the dollar has been constrained by stagflation risks even as the Bank of England lays the ground for a summer rate increase, the geopolitical developments are being watched closely for the timing and scale of any tightening.

Next week’s initial estimate of Q1 GDP growth will probably play second fiddle to the Iran headlines, but will be important nonetheless, particularly the monthly print for March, to gauge what impact the start of the Iran war had on the British economy.

The data is due on Thursday, along with a breakdown of sectoral growth for the full quarter and March.

Kiwi Shines While Euro Lags

It’s a very similar story for the euro, whose recovery has been even slower than the pound’s and remains below its mid-April peak. The pricing out of an almost full 25-bps rate hike from year-end ECB expectations following the easing of tensions in the Middle East is probably behind the euro’s underperformance.

Quarterly employment figures and the second estimate of Q1 GDP growth, both on Wednesday, and Germany’s ZEW economic sentiment gauge on Tuesday are the highlights of the European agenda, though they’re unlikely to sway the euro much.

Elsewhere, China is expected to report a jump in both its CPI and PPI measures on Monday as higher energy prices took hold in April. On Wednesday, quarterly wage growth data will be watched in Australia for clues as on the likelihood of a fourth rate increase by the Reserve Bank of Australia. Meanwhile, in New Zealand, the RBNZ’s survey of quarterly inflation expectations could aid the New Zealand dollar’s impressive one-month-long rally against the greenback if they show an uptick.

Markets have shown their fair acts of stoicism in recent days, not reacting the slightest to bad and relatively hawkish news.

Yesterday, Iran reported US strikes on its capital and a few key energy-producing regions (including Bandar Abbas and Sirik – close to Hormuz), which came as a direct response to the Iranian firing on Gulf countries at the beginning of the week.

Participants believe this will not escalate into something worse; The cold-truce remains, albeit being quite fragile.

To enlighten the mood however, Non-Farm Payrolls offered a very decent beat (+115K vs 62K exp) in this morning's release, allowing Investor mood to remain calm ahead of the weekend action.

The Unemployment Rate shows unchanged while the unrounded figures show a slight increase – But nothing too alarming.

Morning US Data – MarketPulse Economic Calendar

Canada is still showing an unstable employment picture with ups and downs virtually every month – The Canadian economy is cyclical and amid extreme doubts all around the globe, these labor numbers can only depict this truth.

The preliminary University of Michigan Consumer Sentiment also just released and came with a miss, with many consumers still signalling fears for higher inflation (logical with prices at the pump at the highest since 2022).

We will provide a quick outlook on the Market before diving into WTI (US) Oil Charts to get ready for what could be another volatile weekend.

A Mixed Market Picture

Stock and Energy Product Futures – Courtesy of Finviz

Except for the Tech-heavy index quickly restarting its path higher after a quick stopover, Energy and more traditional equities are scratching their heads in search for a concrete direction.

True directional moves may only be found next week, with traders preparing for the Trump-Xi meeting in China (May 14).

Metals Trade Higher, Particularly Silver and Copper

Metals weekly performance – May 8, 2026 – Source: TradingView

Silver and Copper are leading a path higher in the entire asset class, with Gold starting to pick up some momentum.

WTI (US) Oil Forms a New Range Between $93 and $98

WTI Daily Chart – May 8, 2026 – Source: TradingView

Oil is unable to form a concrete breakout, rejecting its up and down spikes at every attempt.

As traders await for further news, Crude is stabilizing between $93 and $98, the two boundaries to keep in check for any clear break (watch for a 4H close above or below for higher breakout odds).

Keep a close eye on sentiment and Middle East news throughout the weekend.

Safe Trades!

This week has been light on the data front so developments in the US-Iran war have shaped markets. The spot oil price declined from USD 115/bbl to around USD 100/bbl following reports of a US one-page memo to the Islamic Republic with suggestions on how to formally end the war while setting up a 30-day period for detailed talks. The deal would involve Iran committing to a moratorium on nuclear enrichment, US lifting sanctions and releasing frozen assets, and both sides lifting the blockage of the Strait of Hormuz (SOH). We are awaiting the Iranian response to the proposal that should come later today. The two-sides remain divided on the issue on Iran's enriched uranium stockpile and on who controls SOH, so the risk of reescalation is high. Even if there was an initial deal, the limbo would continue until there is a more permanent agreement, as talks could collapse and warfare resume anytime. It would be very positive if the SOH would at least gradually reopen but full normalisation would take months.

In terms of data releases, we have received a string of labour market data from the US pointing to broadly steady conditions, which was slightly better than expected. ADP hiring showed steady employment growth, the JOLTs job openings-to-unemployed ratio remaining at 0.95, while continuing jobless claims reached their lowest level since early 2024. Hence, job market data has been slightly better than expected ahead of the US Jobs Report which will be released later this afternoon. In other news, ISM Services delivered mixed signals, with unchanged prices, weaker new orders, and improved business activity and employment indices.

Data releases from the eurozone were light this week. The final PMIs confirmed the flash release for manufacturing while the services index was marginally higher. The Sentix sentiment index rose slightly but remains at the lowest level since April last year. And finally, retail sales for March were broadly similar to February with no clear impact of the war outside of fuel spending, where consumers spend more on fuels but bought a smaller quantity compared to February. Finally, the ECB's wage tracker continues pointing to lower wage growth in 2026 compared to 2025.

From Asia we received PMI data for April where the manufacturing PMI rose in both China, Taiwan, and South Korea, thereby signalling continued growth in the sector as they remain above 50. The global manufacturing sector thus seems to have continued growing in April despite the rise in energy prices as we also saw decent manufacturing PMIs in the eurozone and US last week.

We will not publish the Weekly Focus next week so focus the coming two weeks is on US April CPI on 12 May, flash PMIs for US, eurozone, and UK on Thursday 21 May, and finally euro area negotiated wages and Japanese inflation on 22 May.

Full report in PDF. 

Markets

US payrolls for April printed a stronger-than-expected 115k, easily topping the 65k consensus bar. This solid employment growth followed a strong March as well (185k vs 178k in the initial release) and resulted in the first back-to-back gains in over a year. The increase was widespread in the services sector. Trade & transport (60k) led with private education & health (46k) as the runner-up. IT and financial services were the outliers shedding jobs with the pace in the former sector having accelerated since the turn of the year (AI impact?). The manufacturing sector also forfeited some jobs. Pay growth came in slightly sub-par at 0.2% m/m and 3.6% y/y – hovering near five-year lows. The unemployment rate steadied at 4.3% while the participation rate fell to 61.8%. The labour market environment is still considered as a fragile “low hire, low fire” by the likes of Fed Hammack as of yesterday. Today’s numbers do seem to confirm Fed chair Powell’s message of a labour market that is showing “more and more signs of stability” last week after a year of near-zero job growth. A near-term rate cut in such circumstances is unnecessary, particularly given upside inflation risks posed by the Iran war. US money markets hold on to their view of a long rates status quo at least through 2026 after the labour market report. Rates trade a couple of bps lower to the tune of 4.5 bps. German rates are going nowhere. This paralysis isn’t surprising with the bigger question still unanswered: Iran’s response to the US 14-point MoU. Secretary of State Rubio said “we should be hearing something today” but it’s really anyone’s guess, both on the timing and the actual reply. Oil prices are testing the $100 barrier (Brent) for a third day straight. Stocks lose ground in Europe but gain on WS. The euro takes the lead against most peers, including the USD. EUR/USD rises to 1.1777. DXY is struggling around the 98 big figure.

Gilts rally today, strongly outperforming core peers. Yields drop almost 9 bps at the long end of the curve. With 51 of the 136 English councils already declared, Labour lost 234 seats while Reform UK secured a whopping 380, setting Starmer’s party up for a heavy defeat. The results appear less worse than forecast, though, and the PM already insisted he’s not going anywhere. Regardless of the value of such a statement, it is easing some of the concerns markets had going into the elections vs. a potential follow-up to Starmer and his/her view on fiscal policy. Sterling barely reacted to the election outcome with EUR/GBP treading water around 0.864.

News & Views

The pace of Hungarian headline inflation held steady at 0.4% M/M in April, defying expectations for an acceleration to 0.6% M/M. Prices are 2.1% higher Y/Y. That’s more than in March (1.8%) but also below consensus (2.2%). Accelerating food price inflation was partly offset by disinflation in regulated prices. Core inflation rose by 0.3% M/M and 2.2% Y/Y with core inflation excluding indirect tax effects also printing at 2.2%. Incoming data were below the Hungarian central bank’s forecasts in the March inflation report. The MNB’s measures of underlying inflation developments capturing persistent inflationary trends declined. The inflation of sticky price products was down to 4% Y/Y. Core inflation excluding processed food decreased to 3%. Further MNB analysis showed tradables (goods) inflation rising by 0.7% M/M and 1.4% Y/Y. Services inflation rose by 0.5% M/M and 4.6% Y/Y. Hungarian swap rate dropped significantly after the CPI release, falling by 15 bps (10-yr) to 19 bps (2-yr). The forint shrugged off the loss of interest rate support (and the largest ever YtD Hungarian budget deficit; 70% of the annual target; also released today) with the Hungarian currency testing the strongest levels against the euro since early 2022 at EUR/HUF 355. Ever since Fidesz lost power, Hungarian assets profited from EMU-convergence vibes.

The United Nation’s FAO Food Price Index rose for a third consecutive month, with the index hitting its highest level since February 2023. Food prices rose by 2% Y/Y in April. Details showed a mixed picture. Especially vegetable oils are responsible (+5.9% M/M; index hit highest since July 2022) though meat (+1.2% M/M with index hitting record high) and cereal prices (+0.8% M/M) increased as well. The continued increase in vegetable oil was driven by higher prices of palm, soy, sunflower and rapeseeds oils. Higher demand from the biofuel sector, higher crude prices and fears over lower Asian production in coming months all play their part. Dairy prices fell on a monthly basis (-1.1% M/M) are 21.1% lower than a year ago. Finally, ample global supplies drove sugar prices 4.7% down in April and 21.2% below last year’s price level.

US consumer sentiment weakened slightly in May, remaining near the depressed levels last seen during the 2022 inflation shock as households continued expressing concern about high prices and deteriorating buying conditions.

The University of Michigan Consumer Sentiment index fell from 49.8 to 48.2, while the Current Economic Conditions index dropped sharply from 52.5 to 47.8.

The decline in current conditions reflected rising concern over personal finances and affordability, particularly for major household purchases. Survey respondents continued citing elevated prices as a key pressure point, even though headline inflation expectations eased modestly during the month.

One-year inflation expectations slipped from 4.7% to 4.5%, while long-run inflation expectations edged lower from 3.5% to 3.4%. Still, inflation expectations remain well above pre-Iran war levels and continue exceeding the ranges seen before the pandemic.

The data suggest consumers are becoming somewhat less pessimistic about the future, with the Expectations index ticking up slightly from 48.1 to 48.5, but confidence overall remains fragile as households continue adjusting to higher prices and geopolitical uncertainty.

Full UoM consumer sentiment release here.

Nonfarm payrolls rose by 115k in April, down from March's gain of 185k but ahead of the consensus forecast calling for a smaller print of 65k. Revisions to the two prior months subtracted a total of 16k from the previously reported figures, with February revised lower (-156k from -133k) and March slightly higher (+185k from +178k).

• Smoothing through the volatility, nonfarm payrolls averaged 48k per-month over the last three months, up from the -39k averaged through the three months ending in December 2025.

Private payrolls rose 123k, following a stronger gain of 190k in March. Job gains were concentrated in health care & social assistance (+53.9k), transportation & warehousing (+30.3k) and retail trade (+21.8k). Federal government hiring (-9k) continued to decline.

In the household survey, the unemployment rate was unchanged at 4.3% as the number of unemployed were little changed amid a small decline in the labor force (-92k). The labor force participation rate fell to 61.8% (from 61.9% the month prior), which is its lowest level since late-2021.

Average hourly earnings (AHE) rose a "soft" 0.2% month-on-month (m/m), matching March's gain. On a twelve-month basis, AHE ticked up to 3.6% (from 3.4% the month prior).

Key Implications

Payrolls were volatile through Q1, largely due to temporary factors like inclement weather and a healthcare strike in California. With those effects now in the rearview mirror, April provided as the first "clean" read on hiring for 2026 and the underlying details were reasonably constructive, despite the recent surge in energy prices. Job growth appears to have picked up from its anemic pace at the end of last year and is now running reasonably close to its breakeven rate – holding the unemployment rate steady.

It's too soon to say whether the labor market is regaining momentum, but this morning's report alongside other recent data points including initial jobless claims and job posting data by Indeed certainly help to assuage any fears that conditions have continued to cool. From the Fed's perspective, this means they can sit tight to better assess the extent to which higher energy prices bleed through to core measures of inflation in the months ahead. Yields were relatively muted post-payrolls, with Fed futures priced for the FOMC to remain on hold into next year.

Canada’s economy lost 18k jobs in April (-0.1% m/m), undershooting consensus expectations for a 10k gain. Employment is now virtually unchanged following February’s sharp decline. Full‑time employment fell by 47k, while the number of private‑sector workers was essentially flat (-2.6k).

The unemployment rate rose to 6.9% from 6.7%, as labour supply increased faster than job creation. The number of people in the labour force grew by 33.5k, pushing the labour force participation rate up 0.1 percentage point to 65.0%. The monthly layoff rate (0.6%) remained in-line with the pre-pandemic average.

Job losses were concentrated in services-producing industries, led by information, culture and recreation (-25k), construction (-16k), and other services (-13k). These declines were partially offset by gains in business, building and other support services (+22k), health care and social assistance (+18k), and accommodation and food services (+13k).

Average hourly wages were up 4.5% year-on-year (y/y) down from 4.7% in March. Importantly, the elevated wage gain reflects compositional shifts, with fewer employees with shorter job tenures.

Key Implications

A modest drop in employment coupled with a sizeable jump in the labour force drove up the unemployment rate two ticks this month. Although the monthly data reflect a high degree of variability, the persistently elevated unemployment rate is reflective of a job market that continues to struggle to absorb labour supply. In the coming months we expect the labour force increases to lose steam and help cap further rises in the unemployment rate.

The economic outlook is far from rosy and the ongoing slack in the labour market is reflective of an economy that is still struggling to gain traction. However, with the labour market still soft, the ability of firms to pass on cost increases from the inflation shock to consumers is more limited. This is a key factor that underpins our view that if the sharp rise in oil prices begins to reverse in the coming weeks, the Bank of Canada will be able to stay on hold this year.