Uncle Sam’s NFP data won’t be the only top-tier report scheduled on Friday at 12:30 pm GMT! Here’s what you need to know if you’re planning on trading Canada’s labour market release:
What happened last time?
- Net employment change: -7.5K vs. +17.5K expected, -1.1K in April
- Jobless rate remained at 5.8%
- Labour force participation rate down from 65.4% to 65.3%
Unemployment rate remained at 5.8% in May for a fourth consecutive month, which marks the lowest level since 1976. What took the markets by surprise was that Canada had shed jobs in May, losing a net of 7,500 when analysts had expected a net gain of 17,500 jobs.
Apparently, the 23,600 additional part-time jobs were not enough to offset 31,000 workers who lost their full-time positions in industries such as manufacturing and construction.
Luckily for the bulls, traders were more interested in pricing in the 3.9% annualized increase in wages, which matches a pace last seen in July 2012. Analysts thought that this would push the BOC into a rate hike as early as July.
The strong wages got mixed in with higher oil prices and a bit of profit-taking ahead of the weekend and pushed the Loonie higher after the jobs data release.
What’s expected this time?
- Net employment change: +17.5K to +24.0K vs. -7.5K in May
- Jobless rate: unchanged at 5.8%
- Labor force participation rate: unchanged at 65.3%
Analysts are generally expecting a five-digit net increase in jobs for the month of June after last month’s 7,500 decrease. Meanwhile, participation and jobless rate are seen to remain unchanged for the month.Do these estimates have bite? Leading indicators such as Markit’s manufacturing PMI report and the closely-watched IVEY PMI report won’t be released until after today, so we can only look at historical releases.
A look at the charts below tells us that June’s net job gains tend to print higher than what market players are expecting. However, they also tend to come in LOWER than May’s numbers.
As we saw in last month’s release, though, it might not be about job gains at all. For one thing, traders would like to know if last month’s wage growth is sustained in June. The anticipated increase in summer jobs are also bound to prop up part-time employment by a bit and could blur the picture of the labour market.
BOC members might also overlook employment numbers in favor of other data points. We know from Governor Poloz’ testimony last week that the central bank is more worried about additional tariffs from the U.S. as well as the uncertainties surrounding the housing market.
And then there are other catalysts, such as the NFP report, crude oil price movements, and the U.S. and Chinese tariffs kicking off on Friday. With enough drama, any one of these headlines could nudge the Loonie in either direction.
Unless we see significant hits or misses in Canada’s report, it’s likely that the Loonie will take cues from other catalysts during the trading session. Of course, you could also stay in the sidelines if you’re not comfortable trading news events such as these.
But if you DO plan on trading the Loonie on an NFP Friday, then y’all better be prepared to execute good risk management decisions!