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How y’all doing, forex buddies? The U.S. ain’t the only one that’s gonna be releasing its jobs report this Friday (October 6, 12:30 pm GMT), since Canada will be releasing its jobs report as well.

You know what that means, right? That’s right! It’s another chance to pillage some quick pips from the Loonie. So, if you need to get up to speed on what happened last time and what’s expected this time, then you better read up on today’s Event Preview.

What happened last time?

  • Net employment change: +22.2K vs. +15.0K expected, +10.9K previous
  • Jobless rate: 6.2% vs. steady at 6.3% expected
  • Labor force participation rate: steady at 65.7% as expected
  • Average hourly wage rate m/m: +0.54% vs. -0.35% previous six month high
  • Average hourly wage rate y/y: +1.77% vs. +1.30% previous

I concluded last month’s Event Preview for Canada’s August jobs report by noting that probability seems skewed more towards an upside since economists have a rather strong historical tendency to undershoot their guesstimates for net employment change in the August period.

And historical tendencies continued to play out since Canada saw a net increase of 22.2K jobs in August, which is more than the consensus for a 15K increase, and is a faster pace of jobs growth compare to the previous month’s +10.9K.

Looking at the details of Canada’s August jobs report, the jobless rate improved by ticking lower from 6.3% to 6.2%, which is the lowest since October 2008.

Also, the jobless rate improved even thought the labor force participation rate held steady at 65.7%, which means jobs growth was more than enough to keep up with working-age population growth since some unemployed Candians were able to find jobs.

Even better, the average hourly wage rate grew by 0.54% month-on-month, which is the stongest reading in six months.

Year-on-year, the average hourly wage rate increased by 1.77%, which marks the second month of faster annual increases. The 1.77% increase is the best annual reading since October 2016 to boot.

So far, so good, right? In fact, the only disappointing detail of the jobs report was the quality of jobs generated in August since jobs growth was fueled by the 110.4K increase in part-time jobs. This was partially offset by the loss of 88.1K full-time jobs.

Incidentally, this is the largest loss of full-time jobs since the loss of 145.1K full-time jobs back in July 2010.

Overall, Canada’s August jobs report was net positive. However, forex traders were apparently more focused on the disappointing loss of full-time jobs, which was the biggest since July 2010, since the Loonie’s usual knee-jerk reaction to the better-than-expected reading for net employment change was only very brief. Moreover, follow-through selling ultimately prevailed and the Loonie ended up sliding against its peers.

Overlay of CAD Pairs: 15-Minute Forex Chart
Overlay of CAD Pairs: 15-Minute Forex Chart

Of course, it’s also very likely that forex traders who got in when the BOC unexpectedly hiked rates were using the jobs report to unwind their positions. Also, oil prices were tanking at the time, which may have weighed on the Loonie.

Overlay of CAD Pairs: 15-Minute Forex Chart
Overlay of CAD Pairs: 15-Minute Forex Chart

What’s expected this time?

  • Net employment change: +12.0K to +15.0K, +22.2K previous
  • Jobless rate: steady at 6.2% expected
  • Labor force participation rate: steady at 65.7% expected

For the this Friday’s jobs report, the general consensus is that Canada’s jobless rate will hold steady at 6.2%. Likewise, the participation rate is not expected to budge from 65.7%.

There is no consensus figure with regard to net employment change during the September period, however.

Forecasts generally fall between +12.0K to +15.0K range, though, so most economists at least agree that jobs growth slowed in September.

After all, the general forecast range of +12.0K to +15.0K is weaker compared to September’s net employment change of +22.0K.

Moving on to the leading indicators, we only have Markit’s manufacturing PMI so far since the more comprehensive Ivey PMI will be released after the jobs report.

And according to Markit, “Canadian manufacturers indicated a solid degree of job creation in September, although the rate of employment growth eased from August’s survey record high.”

As for historical tendencies, jobs growth usually accelerates between August and September. However, this goes against the consensus for slower jobs growth, as well as Markit’s finding that jobs growth eased a bit.

As to how economists have fared with their guesstimates, economists have a strong tendency to undershoot their forecasts, so there are far more upside surprises than downside surprises.

As to how economists have fared with their guesstimates, economists have a strong tendency to undershoot their forecasts, so there are far more upside surprises than downside surprises.

To summary, we’re handicapped yet again because the comprehensive Ivey PMI report won’t be released after the jobs report is released. We do have Markit’s manufacturing PMI report, though, and supports the consensus that jobs growth slowed in September.

However, the consensus for slower jobs growth in September goes against historical tendencies since jobs growth in September is usually faster compared to jobs growth in August.

Speaking of historical tendencies, economists also have a tendency to be rather pessimistic with their guesstimates. And as a result, there have historically been more upside surprises than downside surprises, so probability does seem skewed more to the upside, at least with regard to net employment change.

Anyhow, just keep in mind that traders are usually focused on the net change in employment. And if that meets or exceeds the forecast range of 12.0K to 15.0K, then the Loonie usually reacts positively. Conversely, a miss generally triggers a Loonie selloff.

However, if the Loonie’s reaction to the previous jobs report is a precedent, then it’s likely that forex traders are also keeping a very close eye on  full-time employment growth, so you may want to keep tabs on that here.

Also, do note that the Loonie’s price action is usually influenced by oil’s price action, although that has diminished in recent weeks. Still, you may also want to keep an eye on oil prices here.