How y’all doing, forex friends! The U.S. NFP report is not the only jobs report scheduled for release this Friday since Canada will be releasing its July Jobs Report as well (August 4, 12:30 pm GMT).
So if you’re looking for a chance to pillage some quick pips from the Loonie before calling it a week, then heads up since this top-tier report usually does a good job of infusing the Loonie with a burst of volatility.
What happened last time?
- Net employment change: +45.3K vs. +11.3K expected, +54.5K previous
- Jobless rate: 6.5% vs. steady at 6.6% expected
- Labor force participation rate: 65.9% vs. steady at 65.8% expected
- Average hourly wage rate m/m: +0.00% vs. -0.77% previous
- Average hourly wage rate y/y: +1.29%, same as previous
If you can still remember my Event Preview for Canada’s June jobs report, I noted back then that the consensus was for jobs growth to slow down from May’s 54.5K to just around 11.3K.
And as I also noted back then, this is within historical norms. However, I also mentioned that economists tend to undershoot their guesstimates, resulting in more upside surprises.
As it turns out, the June jobs report respected historical norms since Canada printed a net increase of 45.3K jobs in June, which is less than the previous month’s +54.5K but still higher than the consensus of +11.3K.
The other details of the jobs report were positive as well. Full-time employment, for example, rose by 8.1K. This marks the second straight month of growth in full-time jobs.
In addition, the jobless rate improved from 6.6% to 6.5%, beating expectations that it would hold steady at 6.6%. Even better, the jobless rate improved even as the labor force participation rate ticked higher from 65.8% to 65.9%. This means that the Canadian economy was more than capable of absorbing the influx of new and returning workers.
And while wage growth was flat month-on-month, it did put an end to two months of negative wage growth at least.
Year-on-year, wage growth looked better since it printed a 1.29% increase, matching the previous month’s reading.
Overall, Canada’s June jobs report was pretty good, which is why the Loonie appreciated across the board when the jobs report was released. Heck, the Loonie even ignore the hard slump in oil prices at the time.
What’s expected this time?
- Net employment change: +11.7K expected, +45.3K previous
- Jobless rate: steady at 6.5% expected
- Labor force participation rate: steady at 65.9% expected
The general consensus among economists is that the Canadian economy generated around 11.7K jobs in July, which is significantly slower than the 45.3K increase registered in June.
As for the labor indicators, economists forecast that the jobless rate and the labor force participation rate would be unchanged at 6.5% and 65.9% respectively.
Moving on to the leading indicators, we unfortunately only have Markit’s manufacturing PMI report to work with since the more comprehensive Ivey PMI report won’t be released until after the jobs report is released.
Anyhow, Markit’s headline PMI reading improved from 54.7 to 55.5. And Markit noted that there was a “a further solid rise in employment numbers.” As such, the manufacturing sector probably contributed to jobs growth again. However, the service sector actually accounts for most of the monthly jobs gains. And without the Ivey PMI report, we are kinda handicapped on this one.
Moving along to historical trends, July is almost a bad month for jobs growth in Canada since the unadjusted readings almost always show a negative reading.
And even with the smoothing effect of seasonal adjustments, the seasonally-adjusted readings still tend to print negative readings. As you can see below, for example, six of the seasonally-adjusted July readings of the last 10 years printed negative readings.
Moreover, jobs growth in July has been historically weaker compared to the June period, which supports the consensus that jobs growth weakened in July.
As to how economists have fared with their guesstimated, well, economists tend to be overoptimistic, so they overshoot their estimates, which results in more downside surprises.
As such, the consensus for weaker jobs growth in July is therefore within the historical norm. And based on how economists have fared, chance seems to be skewed more towards a possible downside surprise for jobs growth.
As with all economic reports, an upside surprise (for jobs growth in this case) is considered good for the currency while a downside surprise is considered bearish.
Also note that Canadian economic reports are usually only good for pillaging quick pips from the Loonie since oil prices usually define follow-through buying and selling. And and you can check real-time prices of oil futures here and here.
The Loonie’s reaction to the previous jobs report is a bit of an anomaly in that there was follow-through buying on the Loonie. However, that was very likely due to the fact that Canada’s June jobs report was released a week before the BOC statement. And back then, expectations were high that the BOC will hike. And we now know that the BOC did hike in June.