September 2022 Market Update from Canada Life Investment Management

Canada’s labour market appears to be running out of steam. Statistics Canada reported that August’s unemployment rate rose to 5.4% – its highest level since February 2022. The labour market declined for the third straight month, losing almost 40,000 jobs mostly in the educational services and construction sectors. The cooling labour market is unlikely to force the Bank of Canada (BoC) to pause on the next expected rate increase in October, since inflation remains high at 7% in August, down from 7.6% in July.

In September, the U.S. Federal Reserve Board (Fed) raised the target range of its federal funds rate by 75 basis points (bps) to 3.00-3.25%, its fifth consecutive increase. The BoC also raised its key rate by 75 bps to 3.25%, while the Bank of England and European Central Bank followed suit. With the Fed and other central banks raising rates at an aggressive clip, investors turned to the safety of the greenback.