Howdy! Canada will be releasing its jobs report for the May period this Friday (July 9, 12:30 pm GMT), so we’ve got another chance to pillage some quick pips from the Loonie coming our way.
This jobs reports is extra special, though, since it’s the last jobs report before next week’s BOC Statement.
And unless you’ve been frozen in carbonite for the past few weeks, then you already know that expectations are high that the BOC may shift from its neutral policy bias to a more hawkish monetary policy bias next week. As such, this Friday’s jobs report is also important because it may influence future rate hike expectations.
What happened last time?
- Net employment change: +54.5K vs. between +11.0K to +15.0K expected, +3.2K previous
- Jobless rate: ticked higher from 6.5% to 6.6% as expected
- Labor force participation rate: 65.8% vs. steady at 65.6% expected
- Average hourly wage rate m/m: -0.77% vs. -0.15% previous
- Average hourly wage rate y/y: +1.29% vs. +0.66% previous
In my previous Event Preview, I noted that the available leading indicators were mixed and that guesstimates by economists varied, although most forecasts fell between +11.0K to +15.0K.
Moreover, I also noted that forecasts by economists have historically undershot the actual seasonally-adjusted reading, resulting in more upside surprises than downside surprises.
And, well, we did get an upside surprise since Canada generated +54.5K jobs during the month of May, which is great.
Not only that, this is the biggest jobs gain since September 2016 and the details of the report showed that the net increase in jobs was due to the 77.0K increase in full-time jobs, which were partially offset by the loss of 22.3k part-time jobs.
And while the jobless rate rose from 6.5% to 6.6%, such a scenario was expected, so it wasn’t really that disappointing.
What was not expected, however, was that the labor force participation rate would climb from 65.6% to 65.8%. As such, the rise in the jobless rate isn’t actually all that bad since more Canadians decided to join or rejoin the labor force, which is a good sign for the economy.
However, the number of unemployed Canadians did rise from 1,265K to 1,289K, so the Canadian economy wasn’t able to fully absorb the influx of new and returning workers.
The only real disappointment was wage growth since average hourly earnings fell by 0.77% in April, marking the consecutive month of falls.
This disappointing development is not too disappointing in trend terms, however, since average hourly earnings rebounded by 1.29% year-on-year after slowing to +0.66%.
Overall, Canada’s jobs report was pretty good, which is why the Loonie shot higher across the board when the jobs report was released. Unfortunately, faltering oil prices at the time capped the Loonie’s gains. But then again, oil usually dictates the Loonie’s price action, which is why I always advise you to only use Canadian economic reports to pillage some quick pips from the Loonie.
What’s expected this time?
- Net employment change: between +11.3K vs. +54.5K previous
- Jobless rate: steady at 6.6% expected
- Labor force participation rate: steady at 65.8% expected
For the upcoming jobs report for the June period, there is a consensus that the Canadian economy only generated 11.3K jobs. As such, economists are forecasting that jobs growth slowed in June.
Meanwhile, the jobless rate and the participation rate are expected to hold steady at 6.6% and 65.8% respectively.
As to what the leading labor indicators have to say, Ivey’s PMI report would be released after Canada’s jobs report, so we’re a bit handicapped on this one since we only have Markit’s manufacturing PMI report.
And Markit’s headline reading for the month of June unfortunately fell from 55.1 to 54.7. Worse, commentary from Markit noted that “Slower rates of new business and employment growth were the main factors weighing on the headline PMI in June.” Moreover, “latest survey data revealed a softer pace of job creation across the manufacturing sector.”
Going now to the historical trends, the unadjusted employment numbers always print strong job gains in June, which is similar to the pattern in May. Even so, seasonal adjustments mean that the seasonally-adjusted reading is always lower (just like in May).
Unlike the seasonally-adjusted readings for May, however, do note that seasonally-adjusted readings in June tend to print a negative number.
Moving on to how economists have historically fared with their guesstimates, they also tend to generally undershoot (just like in May), so there there are also more upside surprises than downside surprises.
As to how the readings for May and June compare, seasonal adjustments mean that the reading for June tend to be poorer compared to May, so the consensus that jobs growth will slow is historically within the norm.
Anyhow, just make sure to remember that an upside surprise for net employment change usually causes the Loonie to spurt higher as a knee-jerk reaction. On the flip side, a downside surprise usually triggers a quick Loonie selloff.
And again, do keep in mind that Canadian economic reports, including the jobs report, are generally only good for pillaging quick pips from the Loonie.