The economy added just a net 100 jobs last month, Statistics Canada said. Analysts polled by Reuters had forecast a net gain of 13,500 jobs and the unemployment rate to tick up to 5.9 per cent from 5.8 per cent in November.

The average hourly wage growth for permanent employees – a figure closely watched by the central bank – accelerated to an annual rate of 5.7 per cent in December – the highest since January 2021 – from 5.0 per cent in November, Statscan said.

“The main story here is we are seeing some cool down in the job market,” said Doug Porter, chief economist at BMO Capital Markets. “The one disturbing aspect for the (central) bank is that average hourly wages took a big step up in the month.”

The Bank of Canada (BoC) has said wage growth that sticks above 4 per cent would hinder its efforts to sufficiently cool inflation.

The Canadian dollar was trading 0.1 per cent lower at 1.3360 per U.S. dollar, or 74.85 U.S. cents, after earlier touching a 17-day low at 1.3398. The Canadian jobs figures were released at the same time as U.S. data, which showed the economy there added more workers than expected in December.

Wage growth in Canada has remained strong even though job growth has eased in recent months as the economy slows under the impact of the BoC’s 10 rate hikes between March 2022 and July 2023. Canada’s economic growth was flat in October.

“The stagnation in employment, which follows sluggish GDP growth last year, suggests that the impacts of high interest rates are becoming more widespread across the economy,” said Royce Mendes, head of macro strategy at Desjardins Group.

The BoC has left its key policy rate on hold at a 22-year high of 5 per cent since July as it weighs whether rates are high enough to bring inflation back to a 2 per cent target.

But with inflation slowly ticking down and an unexpected contraction in third-quarter gross domestic product, money markets and economists expect the bank to start cutting rates in the first half of 2024.

“With wage numbers like this, the Bank of Canada will remain concerned about the inflation risk being still slanted to the upside,” said Derek Holt, vice president of capital markets economics at Scotiabank. “Markets are still aggressive in pricing cuts as soon as the March or April meetings.”

Canada’s economy added an average of 23,000 jobs per month during the last half of 2023, compared with an average of 48,000 per month in the first half of last year, Statscan said.

December’s gains were entirely in part-time work that offset a job losses in full-time work. Employment in the goods sector decreased by a net 42,900 jobs, driven by losses in manufacturing, construction and agricultural jobs.

Those losses were balanced out by a net 43,100 positions gained in the services sector, led by increases in the professional, scientific and technical services as well as health care and social assistance.

In the services segment, the wholesale and retail trade sector recorded their third consecutive month of job losses, another sign of a slowing economy.

The central bank’s next rate announcement is on Jan. 24, after the release of December inflation data on Jan. 21.

–Additional reporting for Reuters by Dale Smith in Ottawa and Fergal Smith and Divya Rajagopal in Toronto.

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Innovation Minister Francois-Philippe Champagne made the announcement after two hours of what he said were difficult discussions with the chains.

Champagne, who summoned the executives to Ottawa, reiterated a threat that the government could impose new taxes if the chains do not come up with a plan to help address budget-busting price increases.

“They have agreed to support the government of Canada in our efforts to stabilize prices in Canada,” Champagne told reporters, without giving details.

“This is a step in the right direction,” he said. “We’ll keep on pushing them — trust me, this is just the beginning.”

Champagne said in a separate statement the government wants to see “concrete actions” from the retailers by Thanksgiving (Oct. 9).

However, he said, any such actions “must not negatively impact small suppliers or the price that farmers receive for their products.”

Any moves by the grocers, he said, also must not impact “pricing mechanisms as determined by supply-managed industries” such as Canada’s dairy, egg and poultry sectors.

The Liberals are trailing in the polls and facing complaints about the high cost of living and a lack of affordable housing.

One of the five executives at the meeting, Metro CEO Eric La Fleche, said the chains were keen to do all they could but dismissed the idea that they alone were to blame.

“We’re all committed to finding solutions to stabilize prices … it’s an industry issue. Any conversation has to include all the manufacturers, producers, farmers and everybody,” the CEO said.

“It’s not just about the retailers, the minister understands that very clearly.”

The other chains attending the meeting were Loblaws, Sobeys, Walmart and Costco, which together with Metro represent 80 per cent of the Canadian market.

As part of the government’s push to cope with high prices, Prime Minister Justin Trudeau last week announced a tax break designed to boost the construction of new rental apartment buildings and relieve pressure on the Canadian housing market.

Karina Gould, the minister in charge of pushing the government’s agenda through the House of Commons, said she would shortly introduce wide-ranging draft legislation designed to help curb inflation.

Polls show the official opposition Conservatives, who blame high inflation on Trudeau for what they call excessive government spending, would win an election if one were held now, ending eight years of Liberal rule.

— Reporting for Reuters by Steve Scherer and David Ljunggren. Includes files from Glacier FarmMedia Network staff.

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Some 7,500 dock workers represented by the International Longshore and Warehouse Union (ILWU Canada) walked off on July 1 after failing to agree a new wage deal with the British Columbia Maritime Employers Association (BCMEA).

The union says the BCMEA is refusing to give a fair pay rise despite making billions of dollars in profits in recent years.

The strike has upended operations at two of Canada’s three busiest ports, the Port of Vancouver and Port of Prince Rupert — key gateways for exporting the country’s natural resources and commodities and bringing in raw materials.

READ MORE: Pork sector calls for essential service status amid B.C. port strike

Nutrien blamed the work stoppage at the Port of Vancouver for lowering export capacity at its Cory potash mine in Saskatchewan and warned of further hits to production if the strike is prolonged.

The strike could cause more supply chain disruptions and fuel inflation, economists have warned, just as the central bank is trying to cool the economy. The Bank of Canada is widely expected to raise its key interest rate on Wednesday by 25 basis points, to five per cent.

The estimated cost from the 12-day strike is pegged at about $6 billion, based on industry body Canadian Manufacturers and Exporters’ calculation of about $500 million in disrupted trade per day.

The two parties met in person for the first time in more than a week on Monday night, a government source not authorized to speak on the record said.

They were joined by Senator Hassan Yussuf, a former president of the Canadian Labour Congress who earlier this spring helped negotiate an end to Canada’s largest public sector strike ever, the source said.

In statements late Monday, both sides blamed each other for failing to reach a new deal. The association said its proposals to addresses ILWU Canada’s demand to expand the union’s jurisdiction over regular maintenance work on terminals were rejected by the union.

The workers and their employers had walked away from the negotiating table last week, but resumed talks on Saturday.

— Reporting by Ismail Shakil and Steve Scherer in Ottawa; additional reporting by Arshreet Singh.

CORRECTION FROM SOURCE, July 11: Today is the strike’s 11th day, not 12th as reported in an earlier version of this article. We regret the error.

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Finance Minister Chrystia Freeland said tariff relief for Ukrainian goods such as steel — a temporary measure started a year ago — would continue for another year to help support Kyiv as it defends itself against Russia. That measure applied to goods not already covered by the countries’ free trade agreement.

The additional trade access was due to expire on Friday and the government’s decision on whether to extend it further was a test of Canada’s staunch backing of Ukraine.

Canadian poultry and egg farmers and processors had complained that Ukraine’s access made it harder to control imports and also raised concerns about the safety of Ukrainian food due to infrastructure damage.

Before the full-scale war, Ukraine was the sixth-largest chicken meat exporter, according to the U.S. Department of Agriculture.

There’s little evidence though that Ukraine has shipped much of such farm products. During the first five months of the expanded trade access last year, finance officials recorded only one $6,000 ice cream shipment from Ukraine, they told a committee of legislators.

Canadian farmers produce eggs, poultry and dairy under a system that limits production and exposes them to only minimal import competition under quotas. Freeland said that Canada would allow Ukraine to continue shipping those products tariff-free within World Trade Organization quotas, but would reimpose duties on shipments above those quotas.

Ihor Michalchyshyn, CEO of the diaspora group Ukrainian Canadian Congress, had urged the government to continue Ukraine’s full duty-free access to support its farm industry, particularly after a recent dam collapse.

“While we welcome the extension of the tariff waiver on some Ukrainian goods, we are disappointed that Canada excluded some key agricultural industries,” he said in an email.

— Reporting for Reuters by Rod Nickel in Winnipeg and Steve Scherer in Ottawa.

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Ottawa expelled Chinese diplomat Zhao Wei on Monday over allegations related to foreign interference, and hours later, China asked a Canadian diplomat in Shanghai to leave by Saturday in response to what it called Ottawa’s “unreasonable actions.”

“We understand there is retaliation, but we will not be intimidated, we will continue to do everything necessary to keep Canadians protected from foreign interference,” Trudeau told reporters in Ottawa.

A row has simmered since the detention of Huawei Technologies executive Meng Wanzhou in 2018 and Beijing’s subsequent arrest of two Canadians on spying charges. All three were freed in 2021.

Some fear the latest flare-up could have economic repercussions for Canada. Chinese imports of Canadian goods rose 16 per cent last year to a record of $100 billion, and China is Canada’s second-biggest trading partner after the U.S.

Last year, Beijing lifted a three-year ban on imports of canola, Canada’s largest crop, from trading companies Richardson International and Viterra. China is also a major importer of Canadian potash and wheat.

“With China, there’s always a risk” of retaliation, said Tyler McCann, managing director of the Canadian Agri-Food Policy Institute. “(But) it seems the Chinese government is more sensitive about food security than they were years ago and that might mitigate the risk.”

Global supplies of wheat and vegetable oil are in tighter supply due to the Ukraine war, which may make it difficult for China to limit its imports of Canadian wheat and canola.

China “took a very measured response,” Guy Saint-Jacques, a former Canadian ambassador to China, said in an interview on CBC. He said the Chinese could have responded by expelling a more senior official or multiple officials.

Saint-Jacques also said he does not expect China to resort to economic sanctions because Beijing is trying to reassure foreign companies that they can work there after draconian COVID-19 restrictions were dropped.

Beijing has this year rolled out the red carpet for Western leaders including French President Emmanuel Macron, and China’s Premier Li Qiang has reached out to corporate leaders to ensure them the country is now open for business.

Beijing is conducting a “charm offensive (to) convince foreign enterprises to come back to China to invest,” Saint-Jacques added. “So putting sanctions on Canada at this stage would have sent a very bad message to foreign companies.”

— Reporting for Reuters by Ismail Shakil and Steve Scherer in Ottawa, additional reporting by Rod Nickel in Winnipeg.

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PSAC president Chris Aylward said he was “setting a clock on this round of bargaining” and that a strike would be called if there is no deal by 9 p.m. ET on Tuesday.

The strike would affect federal services and could delay tax refunds since about 35,000 workers at the revenue agency would walk out in the middle of tax filing season. Passport renewals ahead of summer travel could also be delayed.

“Despite some progress at the bargaining table, our members are frustrated that while negotiations drag on, they continue to fall behind,” Aylward told reporters. “We’ve always said from day one, we need wages for our members that will keep up with inflation.”

PSAC has been in collective bargaining for a new contract since 2021. Tax agency workers initially sought a pay bump of more than 30 per cent over three years, and others are asking for 13.5 per cent over three years. Inflation peaked at 8.1 per cent last year.

Aylward said the offers received so far had fallen short. Prime Minister Justin Trudeau said he was hopeful a deal would be reached to avert a strike.

“There have been constructive advances and offers and we’re very hopeful that we’re going to be able to resolve this, but it’s at the bargaining table that these things happen and we will continue to do that be there in good faith and work on trying to resolve this for all Canadians,” Trudeau told reporters.

The strike would also affect 65 per cent of employees at the Canadian Grain Commission, including most inspectors of outbound grain at ports, according to the commission. Canada is a major wheat and canola exporter.

The commission is working on contingency plans with grain companies to ensure that “critical grain exports can continue,” during a strike, spokesperson Remi Gosselin said.

— Reporting for Reuters by Steve Scherer in Ottawa; additional reporting by Rod Nickel in Winnipeg.

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Headline inflation hit 6.8 per cent in April, just beating analyst forecasts that the annual rate would stay flat at 6.7 per cent and edging closer to the 6.9 per cent hit in January 1991, Statistics Canada (StatCan) data showed. It was the 13th consecutive month above the Bank of Canada’s one to three per cent control range.

“We were expecting inflation to have marked the peak in March and that didn’t happen,” said Jimmy Jean, chief economist at Desjardins Group.

“When you look at the core measures, you see a pretty strong pickup. So that’s a cause for concern for the Bank of Canada,” he added, noting that the bank needs to ensure that price pressures do not morph into an ‘inflationary spiral.’”

All core measures of inflation rose, including the closely watched CPI Common, which was up 3.2 per cent from an upwardly revised three per cent in March and above a forecast of 2.9 per cent.

Bank of Canada deputy governor Toni Gravelle last week acknowledged that the policy rate, at one per cent, was “too stimulative” and reiterated that interest rates need to be higher.

The central bank is widely expected to make a second 50-basis-point increase when it makes its next decision on June 1 and money markets are betting that the policy rate will be around three per cent by year-end.

“It’s kind of a fine line the Bank of Canada needs to go by… because the trick is to try to get inflation down without creating a lot of havoc. But that’s easier said than done,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.

British inflation also surged in April, hitting a 40-year high, highlighting the global nature of price surges amid geopolitical conflict and continued supply chain disruptions.

Food price pinch

Grocery prices rose 9.7 per cent in April, the largest increase since September 1981, with consumers paying more for nearly everything at the store, said StatCan. Prices for starchy staple foods like pasta and bread led gains.

“Russia’s invasion of Ukraine in late February put upward price pressure on food products that use wheat,” StatCan said.

Shelter prices in April rose at their fastest annual pace since June 1983, while gasoline prices fell slightly from March to April. Still, consumers paid 36.3 per cent more at the pump for gasoline in April compared with a year ago.

“This is the relative calm before another downpour in next month’s report, as gasoline prices are tracking a double-digit increase for May alone,” Doug Porter, chief economist at BMO Economist, said in a note.

StatCan, which will change how it tracks used car prices, starting with its release next month, said in a separate paper that March’s headline rate would have been 6.9 per cent instead of 6.7 per cent, had the new methodology been in place at the last basket update.

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“We intend to exclude Huawei and ZTE from our 5G networks,” Industry Minister Francois-Philippe Champagne told reporters in Ottawa. “Providers who already have this equipment installed will be required to cease its use and remove it under the plans we’re announcing today.”

Champagne added that companies will be required to remove their 5G gear by June, 2024, and would not be reimbursed. Companies using their 4G equipment must be removed by the end of 2027.

The decision — widely expected — had been delayed amid diplomatic tensions with China. The rest of the Five Eyes network — which consists of Canada, the U.S., Britain, Australia and New Zealand — has already banned the equipment.

In September 2018, Canada first announced it would review the possible threats to national security in adopting Huawei equipment.

Then in December of the same year, Huawei chief financial officer Meng Wanzhou was arrested in Canada on a U.S. warrant, creating a long-running dispute with China that finally ended last September with Meng’s release.

After Meng’s arrest, two Canadians were arrested by Beijing and accused of espionage. The two men were released the same day as Meng.

Now diplomatic tensions between China and Canada have eased somewhat. On Wednesday, China removed a three-year restriction on imports of Canadian canola seed, reversing what was considered a retaliatory move for Meng’s arrest.

Winnipeg grain trader Ken Ball of PI Financial said Thursday he’s unsure whether the lifting of canola restrictions will result in increased business, as the suspension had only affected two companies — Viterra and Richardson International — and Canada “was still capable of exporting lots of canola to China if they wanted it through other companies.”

China, he said, is “not doing it because they’re nice guys, they’re doing it for a reason and the reason is they’re anticipating they might need to buy more canola in the upcoming season, with the vegoil situation being what it is.”

Thursday’s decision on Huawei comes after telecom companies in Canada already opted to use other companies’ 5G hardware. ZTE did not immediately responded to requests for comment.

Alykhan Velshi, vice-president of corporate affairs for Huawei in Canada, told CBC the company is still waiting to hear “what sort of national security threats they think Huawei poses.”

Velshi said Huawei still has 1,500 employees in Canada, mostly in research and development, and sold products such as mobile phones, and would continue to do so.

In 2020, Bell Canada and rival Telus — two of the biggest wireless providers — teamed up with Sweden’s Ericsson and Finland’s Nokia to build fifth-generation (5G) telecoms networks, ditching Huawei for the project despite using Huawei 4G gear.

In addition to the ban, Public Safety Minister Marco Mendicino said Canada would draft new legislation to protect critical financial, telecommunications, energy and transport infrastructure from cyber threats.

— Reporting for Reuters by David Ljunggren in Ottawa, additional reporting by Ismail Shakil; writing by Steve Scherer. Includes files from Adam Peleshaty of Glacier MarketsFarm.

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The headline rate hit 6.7 per cent in March, well above analyst expectations of 6.1 per cent and a full percentage point higher than in February. It was the 12th consecutive month above the central bank’s one to three per cent control range and just short of the 6.9 per cent hit in January 1991.

The higher-than-expected number increases the likelihood of the Bank of Canada making another large rate hike when it next meets in June. The bank raised rates by half a percentage point last week and said more increases were coming to fight inflation.

“I think a 50-basis-point rate hike was always likely in June… This cements it,” said Andrew Kelvin, chief Canada strategist at TD Securities. He added that a 75-basis-point move would still be unlikely.

The Canadian dollar rose to a three-week high of 1.2503 relative to the U.S., or 79.98 U.S. cents, after the data.

Countries around the world are grappling with hot inflation coming out of the COVID-19 pandemic amid booming demand and supply chain bottlenecks. Russia’s invasion of Ukraine has put additional pressure on key commodity prices, adding to the pinch.

Canadian gasoline prices were up 11.8 per cent on the month in March and 39.8 per cent on the year, as global oil prices surged on the Ukraine conflict. Food prices jumped 8.7 per cent on the year, with pasta and cereal products up on wheat futures, according to Statcan.

Statcan noted continued price pressures on housing and said a very tight labour market was driving wage inflation. Durable goods rose at the fastest rate since 1982, driven by vehicle and furniture prices.

“That’s just broadening inflation. That’s a tight economy and tight labour market,” said Jimmy Jean, chief economist at Desjardin Group. “It screams for the Bank of Canada to maintain that accelerated pace of normalization.”

In mid-April, Bank of Canada governor Tiff Macklem said the central bank would continue to act “forcefully” if needed.

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The maker of Ram, Dodge, Chrysler, Fiat and Jeep vehicles said its Automotive Cells Co. (ACC) joint venture with Mercedes-Benz and TotalEnergies would build a battery plant in Italy and boost its capacity in Europe.

Separately, South Korea’s LG Energy Solution (LGES) said it would invest about $1.9 billion to set up a joint venture with Stellantis to produce batteries in Canada.

The total investment will be more than $5 billion, which Innovation Minister Francois-Philippe Champagne said was the largest ever in the Canadian auto sector. Officials did not immediately say how much the federal and provincial governments were contributing.

The Canadian plant, to be built just across the border from Detroit, aims for an annual production capacity in excess of 45 gigawatt hours (GWh) and will create an estimated 2,500 new jobs in the Windsor area, the companies said.

The moves are part of a plan by the world’s fourth largest carmaker to have five battery plants, two in North America and three in Europe, where it has already announced so-called ‘gigafactories’ in France and Germany, also being built via ACC.

They come as rivals also move forward with battery production plans and as the car industry struggles with chip shortages and other supply chain disruptions.

Volkswagen on Wednesday picked a site near Valencia for its planned battery cell plant in Spain, while Tesla on Tuesday launched a factory in Germany, its first European hub.

ACC said on Wednesday it would convert an existing Stellantis engine plant in the southern Italian town of Termoli into a battery facility as agreed Monday in a memorandum of understanding with Italian authorities.

The total investment for Termoli would amount to 2.3 billion euros (C$3.2 billion), including 370 million euros in public funds, Italy’s deputy industry minister said in a statement.

The plant in Canada comes as the country, rich in key materials for EV battery production, has been wooing battery makers to safeguard the future of its car manufacturing industry as the world seeks to cut emissions.

Ontario is geographically close to U.S. automakers in Michigan and Ohio, and General Motors, Ford Motor Co. and Stellantis have all announced plans to make electric vehicles at factories in Ontario.

“This is going to make Windsor the home of Canada’s first EV battery manufacturing plant, a plant that will be manufacturing hundreds of thousands of batteries,” Champagne said. “It’s great news for the entire auto sector in Canada.”

Separately, ACC said it would increase its industrial capacity to at least 120 gigawatt hours (GWh) by 2030, versus an initial target of 48 GWh, and scale up the development and production of next-generation high-performance battery cells and modules.

The plan will involve an investment of more than seven billion euros, ACC said, and will include bringing production capacity at its French and German plants to 40 GWh each, from the 24 GWh initially planned.

This suggests the Termoli battery plan would also have a capacity of 40 GWh. Tesla’s Berlin plant is aiming for an eventual capacity of 50 GWh.

Presenting its first business plan earlier this month, Stellantis said it aimed to sell five million battery electric vehicles a year by 2030. It also increased its planned battery capacity by 140 GWh to approximately 400 GWh, through its five gigafactories and additional supply contracts.

— Reporting for Reuters by Giulio Piovaccari in Milan and Steve Scherer in Ottawa; additional reporting by Giuseppe Fonte and Giulia Segreti in Rome and Heekyong Yang and Joyce Lee in Seoul.

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