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How y’all doing, forex buddies?

Are you looking for a likely catalyst that would allow you to pillage some quick pips from the Loonie before the week ends?

If you are, then just know that Canada will be releasing its jobs report this Friday (Feb. 10, 1:30 pm GMT).

And if you need to get up to speed on what happened last time, as well as what’s expected for the upcoming release, then today’s write-up will help you out.

What happened last time?

  • Jobless rate: uptick from 6.8% to 6.9% as expected
  • Net employment change: +53.7K vs. -5.0K expected, +10.7K previous
  • Labor force participation rate: climbed back to 65.8% from 65.6%

The general consensus among economists was that Canada would shed 5K jobs in December.

However, the Canadian economy generated a net increase of 53.7K jobs instead. This marks the fifth consecutive month of job gains, with December’s reading being the biggest job gain in three months.

Canadian January Jobs Market: Actual Readings

Even better, the net increase in jobs was thanks to the 81.3K increase in full-time jobs, which was partially offset by the loss of 27.6K part-time jobs. This is the first net increase in full-time jobs in three months.

Better still, this is the biggest increase in full-time jobs in 43 months. Although it is kinda disappointing that part-time jobs also fell for the first time in four months, with December’s losses being the biggest in seven months.

Looking at the other details, the jobless rate ticked higher from 6.8% to 6.9%. This is not really that disappointing, though, since the uptick was widely expected.

Moreover, the uptick in the jobless rate was due to the labor force participation rate jumping back up to 65.8% after dipping to 65.6%. The higher participation rate, in turn, was due to the labor force increasing by 68.5K while the working-age population only increased by 17.4K.

On a slightly more downbeat note, the number of unemployed people did increase by 14.7K, so the Canadian economy wasn’t able to accommodate a substantial portion of the people who joined or rejoining the labor force.

Overall, Canada’s December jobs report was pretty good, though, especially the surge in full-time employment. As such, forex traders reacted by buying up the Loonie.

USD/CAD 15-Minute Forex Chart
USD/CAD 15-Minute Forex Chart

What’s the consensus this time?

  • Jobless rate: steady at 6.9% expected
  • Net employment change: -10.0K expected vs. +53.7K previous
  • Labor force participation rate: steady at 65.8% expected

For the employment situation in January, most economists agree that job creation in the Canadian economy stagnated, with job shedding of up to 10K jobs also being forecasted, after the previous month’s bumper 53.7K gain.

With regard to the other labor indicators, most economists forecast that the labor force participation rate would hold steady at 65.8%. The jobless rate, meanwhile, is also expected to hold steady at 6.9%.

Looking at the available leading indicators, the manufacturing PMI reading from Markit/RBC jumped from 51.8 to 53.5, which is a two-year high.

With regard to employment, commentary from the PMI report noted that “the rate of job creation was the fastest since last July, which was linked to greater production requirements and improved confidence towards the business outlook.” Job creation in the manufacturing sector, which accounts for around 9% of total employment, therefore looks pretty good.

And while the headline reading for the more comprehensive Ivey PMI dropped from 60.8 to 57.2 in January, the employment sub-index actually improved from 51.7 to 53.5. Overall job creation, therefore, picked up the pace in January, according to Ivey’s survey respondents.

As for the historical trends, Canada’s unadjusted employment numbers always show job losses in January. However, seasonal adjustments usually bump the seasonally-adjusted reading into positive territory.

Canadian January Jobs Market: Seasonal Adjustments

With regard to economists’ track record, however, economists tend to undershoot their estimates, so there are slightly more upside surprises. That doesn’t automatically mean that we’ll be getting an upside surprise for the upcoming release, though.

Canadian January Jobs Market: Actual Readings

Anyhow, just remember that an upside surprise usually triggers a quick Loonie, with the reaction to the previous jobs reports being a textbook example. Conversely, a downside surprise usually triggers a quick Loonie dump.

Also, as usual, follow-through buying or selling is generally dependent on the details of the report, namely the labor force participation rate and full-time employment. Although oil’s price action is normally the determining factor, more often than not.