08:40 AM EDT, 07/08/2024 (MT Newswires) -- Rosenberg Research on Monday noted that Canadian employment posted a surprise contraction in June, falling by -1.4k and dramatically undercutting the consensus forecast of +25k. On top of that, it also noted, the unemployment rate picked up +0.2 percentage points to 6.4% (+0.1 point more than the consensus expected). According to Rosenberg Research, the data is "flashing a recessionary red light" -- saying that if one is to add in the "hot pace" of labor force growth (+40.4k in June) and declining aggregate hours worked (down -0.4% MoM), the takeaway is a "continued build-up of disinflationary slack in the Canadian labor market."

The Bank of Canada, Rosenberg Research said, "should be more focused on the continuing build-up of slack on the supply side of the economy, which is signaling a clear case for rates to come down from their still highly restrictive levels". It noted markets agree, pricing in around 55% odds of a cut in July now, and the 10-year GoC bond yield rallying almost 5 basis points on the release. The Rosenberg team say if Governor Tiff Macklem and the others on the BoC's Governing Council "err by over-interpreting the signal from the wage data" and see the May inflation surprise as now the main risk, there is still another CPI print before the meeting which has the potential to soften those concerns.