Governor Stephen S. Poloz said the labour market is a key source of resilience for Canada’s economy. He outlined improvements in recent years while pointing out there’s more work to do. He also discussed Governing Council’s decision yesterday to lower interest rates and the role that COVID-19—the coronavirus—played.
Watch Governor Stephen S. Poloz speak at an event hosted by Women in Capital Markets in Toronto.
Policy rate lowered
We decided to lower the policy rate by 50 basis points to 1¼ percent.
The labour market is healthy
COVID-19 may seriously test the Canadian economy’s resilience.
A healthy labour market has supported that resilience over the past couple of years.
More people are getting new jobs that better match their skills and experience, and getting higher pay as a result. There are plenty of job openings, and it takes less time for unemployed people to find work.
Together, that is increasing participation in the labour market for all age groups.
It also has supported household spending, which is very important for the economy.
But there’s still work to do
While the labour market is strong overall, it’s not working for everyone.
The Prairies are still feeling the effects of low oil prices, so unemployment is higher in that region.
Nationwide, many employers can’t find people with the right skills for the jobs that are available.
And groups like women, Indigenous peoples and new immigrants face barriers to joining the work force.
The more people who are active in an economy’s labour market, the greater the potential to create wealth without sparking inflation. That benefits everyone and makes growth more long-lasting.
A solid, secure job is the primary basis for consumer confidence and household spending, which is the primary engine of growth of any economy.
How we can increase our resilience
How can we strengthen the labour market and boost our resilience to threats like COVID-19?
For starters, the Bank’s efforts to keep inflation close to 2 percent help the economy operate close to its potential. That encourages job creation in both good times and bad.
For example, in 2015 we lowered interest rates to support our inflation target after oil prices had collapsed. Our actions helped limit the number of jobs lost and how long people were unemployed.
Public policy-makers also could explore ways to make it easier to match people with job vacancies.
Given the importance of labour market health to our economic resilience, it is natural to ask whether there are policies available to strengthen it further.
Watch Governor Stephen S. Poloz answer questions from the media following his speech.
Our decision yesterday
COVID-19 represents a large negative shock to the Canadian and global economic outlooks.
It poses a significant health threat in many countries and has caused business activity to slow globally.
The Bank will monitor economic and financial conditions closely in coordination with other major central banks and governments.
As the COVID-19 situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.