The latest piece of hard economic data has market watchers looking to see how the Bank of Canada will react.

The January employment numbers show the economy added a stunning 150,000 jobs.  That is 10-times what was forecast and is the second out-sized reading in a row.  December saw a downwardly revised total of 69,000 new jobs.  The unemployment rate remains at a near record low of 5%.

The job numbers indicate Canada’s economy remains strong and continues to face inflationary pressures.

Markets and investors reacted almost immediately, reversing their expectations of a probable rate cut this year, to forecasting another rate hike in the coming months.  But many analysts say that may be pre-mature.

The BoC has put a “conditional” pause on further increases, giving itself some “wiggle room” so it does not have to respond to any, single, data point, regardless of how strong it is.  And there are indications the Bank’s rate hikes over the last year are starting to catch up to the broader economy.

The central bank’s recent Business Outlook Survey indicates that hiring plans have been reduced and wage growth is slowing.  While job postings are still 50% above pre-pandemic levels, wage increases have come down in recent months, slipping to 4.5% in January from 4.7% in December.

In general, analysts say the hikes are still gradually flowing through to household and business debt payments.  They expect demand will erode, pushing unemployment higher through the end of the year.