Whattup, forex playas! On Friday at 12:30 pm GMT Statistics Canada will print the labor market numbers for the month of October.
Are you planning on trading the report? Here are points that might help you out if you are:
What happened last time?
- Net employment change: +63.3K vs. +25.0K expected, -51.6K in August
- Jobless rate dips from 6.0% to 5.9% as expected
- Labor force participation rate surprisingly improves from 65.3% to 65.4%
Canada added a net 63,300 jobs in September, which left market expectations of a 25,000-addition eating dust. Not only that, but the jobless rate AND the labor market participation rate also printed stronger results for the month.
But the devil was in the details that day. See, market geeks soon noticed that the job gains were mostly from part-timers, as part-time employment climbed by 80,200 while full-time workers declined by 16,900.
What’s more, average hourly wages only gained 2.35% from a year ago. That’s the weakest reading in a year, yo!
With wages barely rising and full-time workers losing their jobs, investors questioned the sustainability of September’s job gains and its potential impact on consumer spending.
As a result, the Loonie extended its intraweek downtrend and capped the week lower against most of its counterparts.
What’s expected this time?
- Net employment change: +12.5K vs. +63.3K in September
- Jobless rate to remain at 5.9%
- Labor force participation rate to steady at 65.4%
Analysts are more conservative with their estimates, expecting only 12,500 net jobs increase after September’s jump. Meanwhile, both the jobless rate and labor participation rates are expected to maintain their numbers.
Since leading indicators like Markit’s manufacturing PMI and IVEY PMI reports aren’t released yet, we only have historical tendencies to look at.
As you can see, traders have been underestimating actual October figures in the last five of the ten releases.
There’s no such pattern in unemployment rates, though, nor are there any seasonal patterns in both the employment change and jobless rates.
Some trading notes
Aside from the nuggets above, here are a few points you should note before trading the event:
Pay attention to the composition of job gains/losses
Aside from notable hits and misses in headline numbers, traders will pay attention to where those job gains/losses came from.
Further weaknesses in full-time employment and wage growth can affect consumer spending and prices, so you can bet that the Bank of Canada (BOC) will be watching those deets closely.
Keep track of other reports from Canada
Other reports, such as the monthly GDP release scheduled tomorrow and the manufacturing PMI report on Thursday can affect the Loonie’s intraweek trends and set the tone for how markets will react to Friday’s release.
An already strong downtrend, for example, could limit further downside movement for the Loonie. Consequently, it can magnify an upward spike in case of a stronger-than-expected jobs report.
Take note of other market-movers
As listed in yesterday’s outlook update, there are other top-tier reports scheduled AT THE SAME TIME as Canada’s labor market numbers.
The U.S. NFP report, for example, can affect intraday trends of higher-yielding currencies like the Loonie. Meanwhile, Canada’s trade report can also set its own tune if the numbers miss (or exceed) its estimates.
Don’t jump in right away.
Unless you’re sure of the Loonie’s reaction or have planned your exit strategies to the last pip, you could wait a bit to see how Loonie bulls and bears react to ALL of the catalysts hitting the comdoll on Friday before hitting your buy/sell orders.