Uncle Sam isn’t the only one printing labor market numbers this week! On Friday at 1:30 pm GMT Canada will also publish labor market data for the month of February.
Here are points you need to know before you trade the event:
What happened last time?
- Net employment change: -88.0K vs. +10.3K expected, +78.6K previous
- Jobless rate: 5.9% vs. 5.8% expected, 5.7% previous
- Labor force participation rate: 65.5% vs. 65.8% previous
- Average hourly wage rate: +0.56% vs. +0.23% in December
Canada’s labor market took a hit in January, printing a net loss of 88,000 jobs for the month. That’s the largest decrease since January 2009, yo. Heck, the move was so sharp that it pushed the unemployment rate from 5.8% to 5.9%!
The Loonie dropped across the board at the headlines. Fortunately for the bulls, the bearish momentum lost its legs when traders took a second look at the details.
See, full-time employment still registered a net gain of 49,000 even though 137,000 part-time jobs were lost. Wages also rose for a sixth consecutive month, printing a 0.56% gain after December’s 0.23% increase.
What’s expected this time?
- Net employment change: +17.5K vs. -88.0K previous
- Jobless rate to remain at 5.9%
- Labor force participation rate to inch higher from 65.5% to 65.6%
Do leading indicators support expectations of a stronger reading in February? Unfortunately, we only have Markit’s manufacturing PMI report to turn to, at least for now.
According to the release, there’s “relatively strong improvement” in overall business conditions, and that increases in output and new orders have “contributed to the sharpest pace of job creation for six months.” Wowza!
Before you get excited, though, take note that it’s the service sector that provides the bulk of the Canadian’s jobs.
The IVEY PMI – which considers a broader field of purchasing managers – won’t be released until later today. Make sure you stick around to see if the report supports a faster pace of job creation, will ya?
What can past February releases tell us?
As you can see, there’s no clear pattern in predicting analysts’ guesstimates for February. That is, the odds of February’s figures overshooting the +17.5K consensus are just about the same as the odds of a disappointment.
Seasonality paints a clearer picture. In the chart below we can see that, except for the 2009, 2013, and 2016 releases, February’s net employment change tends to be weaker than its January reading.
This means that the odds point to a weaker reading than January’s -88.0K, which contrasts with the expected improvement to +17.5K for February. Yikes!
Until we know more from the IVEY PMI, it looks like there’s room for considering a downside surprise for the headline report. Remember that Loonie traders also price in details of the report such as part-time and full-time employment and wage growth, so be vigilant with your positions!
Any other factors I should be aware of?
Take note that there are other points that might influence the Loonie’s price action during U.S. trading session:
U.S. NFP report
It’s not called NFP week for nothing. We found out from Fed Governor Powell last week that he wanted to see further improvements in the labor market. If the NFP prints unambiguously strong numbers, then we might see the dollar crush its counterparts across the board.
Yesterday President Donald Trump threatened that his “tariffs on steel and aluminum will only come off if new & fair NAFTA agreement is signed.”
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
If Trump’s colleagues fail to convince the POTUS to moderate his stance over the next couple of days, then we might see more losses for the Loonie.
That’s it for our preview this week, folks. If you do decide to trade the event, make sure you have your trading plan locked down before you put in any orders!