The deteriorating Canadian jobs picture increases the likelihood that the Bank of Canada will have to use alternative policy tactics, such as credit or quantitative easing measures, says BCA Research.

Canada’s unemployment rate rose in March to 8%, the worst jobless rate in seven years, BCA notes. It says that “the economic environment is likely to remain extremely challenging this year as a number of factors combine to restrain growth. Contracting global activity will continue to put downward pressure on exports, weigh on Canada’s terms-of-trade and undermine business sentiment. Consumer confidence will also remain depressed, as job losses mount and house prices fall, leading to further declines in spending.”

As a result, it suggests that the central bank “has grown increasingly concerned regarding the outlook and the rapid deterioration in employment conditions increasing the likelihood of credit or quantitative easing.”

“Stay overweight Canadian government bonds within a globally hedged fixed income portfolio,” it counsels.

IE