Friday’s stronger-than-expected jobs report led some of the country’s more dovish forecasters to revise their views on when they think the Bank of Canada will starting cutting interest rates.

Capital Economics’ Stephen Brown and Desjardins Securities’ Royce Mendes joined the consensus of economists in a Bloomberg survey who see the central bank lowering its policy rate at its June 5 decision. Previously, both firms were expecting a cut in April. 

The shift came after new data showed that in January, Canada’s job market scored the biggest gains in four months. The unemployment rate fell to 5.7 per cent, a tightening of labor conditions not expected by the majority of economists, and the first such decline since December 2022.

“The employment data suggests that June is now more likely for the first Bank of Canada rate cut of this cycle than April,” Mendes said in a report to investors, adding that recent layoffs at major companies still suggest the economy is set for a “bumpy ride.” His firm now expects 125 basis points of cuts this year, 25 basis points less than before. 

The central bank’s benchmark overnight rate is 5 per cent. 

“The strength of the labor market in January is another reason to think that the Bank of Canada can wait a little longer before it starts to cut interest rates,” Brown and colleague Olivia Cross said in a note, changing their rate-cut forecast to June. “By then, we should see clearer signs that both shelter and non-shelter inflation has eased.”

Hours worked rose 0.6 per cent in January, Statistics Canada said, adding to evidence that the country’s economy isn’t headed for a recession yet.

Friday’s data also showed wage pressures easing on a yearly basis. Traders in overnight swaps are betting the central bank will start cutting rates in July.