Forex Preview: Canada’s Jobs Report (Mar)

Hey there, forex friends! If you’re looking for a likely catalyst that may give you an opportunity to pillage some quick pips from the Loonie, then look no further since Canada’s jobs report is scheduled for release this Friday (April 8, 1:30 pm GMT). If you’re planning to trade this event, then gear up by reading up on another awesome edition of my Forex Preview for Canada’s jobs report.

What happened last time?

  • Jobless rate: ticked higher to 7.3% vs. steady at 7.2% expected
  • Net employment change: -2.3K vs. +10.0K expected, -5.7K previous
  • Labor force participation rate: steady at 65.9%

In my previous Forex Preview for Canada’s jobs report, I concluded that “the leading indicators seem to be more skewed towards a possible downside surprise.” That conclusion turned out to be right since Canada’s economy saw a net loss of 2.3K jobs in February instead of gaining 10.0K jobs as expected. This marks the second straight month that Canada has been shedding jobs.

Not only that, the net loss in jobs was due to full-time employment getting slashed by 51.8K, with the 49.5K gain in part-time jobs partially offsetting the decline in full-time jobs. This is bad because full-time jobs tend to pay more and offer more security than part-time jobs. Also, the labor force participation rate held steady at 65.9%, so the net loss in jobs was likely the reason why the jobless rate ticked higher to 7.3%, together with the the number of unemployed growing by 20.1K to 1,410.4K people. The jobless rate has been ticking higher by 0.1% for the third consecutive month now.

Surprisingly, the details of the report showed that it was the service sector that saw the largest decrease in jobs (-44.5K vs. +19.7K previous), with educational services (-16.9K vs. +10.4K previous) and healthcare and social assistance services (-16.9K vs. +11.5K previous) getting hit the hardest. Also, the natural resources industry resumed shedding jobs, losing 8.9K jobs in February after gaining 1.4K jobs previously.

Overall, Canada’s jobs report was a disappointment, so Forex traders dumped the Loonie across the board as a knee-jerk reaction. Once the initial reaction was over, however, the Loonie’s forex price action began to diverge, with the Loonie clawing its way back (and then some) against the safe-haven currencies (JPY, USD, CHF) while extending its losses against its fellow comdolls (AUD, NZD).

USD/CAD 15-Minute Forex Chart

USD/CAD 15-Minute Forex Chart

This diverging price action was very likely due to the broad-based commodities rally and risk-on sentiment at the time, which pumped up demand for the higher-yielding comdolls. Oil benchmarks were getting a boost as well, which is probably why the Loonie was able to recover against the safe-haven currencies, so keep that in mind if you have a longer-term Loonie trade in mind.

What can forex traders expect this time?

  • Jobless rate: remain unchanged at 7.3% expected
  • Net employment change: +10.0K expected vs. -2.3K previous

For the upcoming March jobs report, market analysts expect that Canada’s economy will see a net increase of 10.0K jobs while the jobless rate is expected to hold steady at 7.3%.

Looking at the available leading indicators, the Markit/RBC manufacturing PMI report showed that the reading jumped from 49.4 to 51.5 in March, which means that the manufacturing sector is finally expanding again after seven straight months of contractions.

According to commentary from the report, “overall payroll numbers stabilized in March, thereby ending an eight-month period of falling workforce levels,” so perhaps the manufacturing sector will contribute positively to the upcoming jobs report.

The BOC’s Business Outlook Survey also reported that both investment and employment intentions are on the rise among Canadian businesses, “particularly among exporters not tied to the commodity sector and firms in service industries.” However, “the slump in the energy sector continues to weigh on employment intentions” for energy-related companies, so  “planned layoffs and hiring freezes remain disproportionately high” in such businesses, which means that the natural resources industry is likely gonna be a drag again.

Finally, Canada’s Ivey PMI completely failed to meet the market’s expectations by dropping to 50.1 in March instead of climbing higher to 55.0 (53.4 previous), but the employment sub-index advanced a bit from 50.7 to 50.3, so employment expanded at a very slightly faster pace. It’s just above stagnation level at 50.0, though. Also, the Ivey PMI has no sector or industry breakdown, so there’s still a chance that a there’s gonna be another surprise job shedding in the services sector like last time.

Overall, the available leading indicators and reports seem to support job gains in March. However, be wary of the possibility that the actual net increase in jobs may miss expectations.