How y’all doing, forex buddies? The U.S. ain’t the only one that’s gonna be releasing its jobs report this Friday (March 10, 1:30 pm GMT), since Canada will be releasing its jobs report as well. You know what that means, right? That’s right! It’s a chance to pillage some quick pips from the Loonie once more. 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.
What happened last time?
- January’s net employment change: +48.3.7K vs. -10.0K expected
- December’s net employment change: downgraded from +53.7K to +46.1K
- Jobless rate: ticked lower to 6.8% vs. steady at 6.9% expected
- Labor force participation rate: ticked higher to 65.9% vs. to steady at 65.8% expected
In my Forex Preview for Canada’s January jobs report, I noted that leading labor indicators were saying that job creation picked up the pace in January and that economists tend to undershoot their estimates, so there are slightly more upside surprises historically speaking.
As it turns out, that was indeed the case, since Canada generated 48.3K jobs in January, which is an upside surprise compared to the consensus for a net loss of 10K jobs. Moreover, February’s reading is higher than January’s downwardly revised net gain of 46.1K jobs (+53.7K originally), so jobs growth did pick up the pace.
It gets even better because the net gains in January marks the second consecutive month of jobs growth. Moreover, the net increase in jobs was thanks to the 15.8K increase in full-time jobs and the 32.4K increase in part-time jobs. The increase in part-time jobs was lower compared to the +70.9K printed in January, though. Still, it marks the second straight months of gains for full-time employment.
Moving on, Canada’s jobless rate improved from 6.9% to 6.8%, as the number of unemployed Canadians fell from 1,341.6K to 1,324.4K. Better still, the jobless rate improved even though the labor force participation rate climbed higher from 65.8% to 65.9%. This means that the Canadian economy was good enough to absorb the influx of new or returning workers, which is, well, good.
Overall, January’s jobs report was great, with the readings coming in better-than-expected and the details painting a pretty healthy picture. As such, market players reacted by buying up the Loonie across the board. As usual, though, there was very little follow-through buying after the knee-jerk reaction.
What’s expected this time?
- Net employment change: +2.5K expected vs. +48.3K previous
- Jobless rate: steady at 6.8% expected
- Labor force participation rate: steady at 65.9% expected
For the month of February, there are actually varying views on Canada’s employment situation, at least with regard to net employment change. Economists at Toronto-Dominion (TD) Bank, for example, expect a net loss of 35K jobs. Economists from the National Bank of Canada, meanwhile, are expecting a net gain of 5.0K jobs. There’s therefore no real consensus. However, the median appears to be a net gain of 2.5K jobs, so let’s go with that. Thankfully, though, there is a consensus that the jobless rate and the labor force participation rate would hold steady at 6.8% and 65.9% respectively.
Looking at the available leading indicators, the manufacturing PMI reading from Markit/RBC climbed from 53.5 to 54.7, which is a 27-month high. And commentary from the PMI report noted that “Greater business confidence contributed to the strongest increase in employment for 27 months in February.”
The headline reading for the more comprehensive Ivey PMI, meanwhile, slid from 57.2 to a six-month low of 55.0 in February. Moreover, this marks the second month of deteriorating readings. However, the employment index actually improved further from 53.5 to 54.5. This means that jobs growth accelerated further, despite the drop in the headline PMI reading.
As for the historical trends, Canada’s unadjusted employment numbers almost always show job gains during the February period. However, seasonal adjustments means that the seasonally-adjusted reading is always lower, with negative employment numbers being quite common.
As to how accurate economists are with their forecasts, their forecasts are actually all over the place. In fact, the only consistent thing is that forecasts are always way off from the actual readings. Still, there are historically more downside surprises than upside surprises. That doesn’t mean that we’ll be getting a downside surprise for the upcoming jobs report of course.
Anyhow, just remember that Canada’s jobs report is usually only good for pillaging quick pips from the Loonie, with an upside surprise usually triggering a quick Loonie rally and a downside surprise triggering a quick Loonie dump.
Canada’s jobs report rarely generates follow-through buying or selling, though, since forex traders usually turn to oil’s price action for direction, so just keep that in mind. Oh, and you can check real-time prices of oil futures here and here.
Also, you may wanna keep away from USD/CAD since Canada’s jobs report would be released at the same time as the NFP report, and USD/CAD will very likely take cues from the NFP report, rather than Canada’s jobs report.