“The central bank has been looking for evidence that inflation will continue moving towards the 2% target. With the labour market showing renewed strength, there is potential for consumer spending to rise in the coming months, forcing inflation higher. This will be a concern for the BoC, which has seen this narrative play out in the U.S. over 2024,” he said.

RBC’s assistant chief economist, Nathan Janzen, says the jobs stats are less impressive when considered in context of population growth. He also highlights the rise in unemployment compared to other advanced economies, and he believes the labour market has softened enough to ease inflation pressures.

“Our own base case assumption is that the BoC will be in a position to cut the overnight rate in June. But with labour market data for April surprising on the upside, that is also contingent on the next round of inflation numbers continuing to flag easing in price pressures,” he said.

Andrew Grantham at CIBC Capital Markets also cites jobs growth vs. population growth as evidence of a softening labour market, holding the door open for a rate cut next month depending on CPI stats.

“With the unemployment rate remaining higher than it was at the start of the year and wage pressures easing slightly, the data is still consistent with a gradual loosening of labour market conditions. We continue to forecast a first interest rate cut at the next meeting in June.”