How y’all doing, forex friends? Canada will be releasing its latest jobs report this Friday at 12:30 pm GMT, which means that the Loonie will very likely get a volatility boost.
And if you’re looking to pillage some quick pips from the Loonie before calling it a week, then this event is your best bet. And it just so happens that I have an Event Preview for it.
What happened last time?
- Net employment change: -1.1K vs. +17.8K expected, +32.3K previous
- Jobless rate: unchanged at 5.8% as expected
- Labour force participation rate: 65.4% vs. steady at 65.5% expected
- Average hourly wage rate m/m: +0.19%, same as previous
- Average hourly wage rate y/y: +3.60% vs. +3.25% previous
Canada’s April jobs report revealed that Canada shed 1.1K jobs in April, which is severely disappointing since the market was expecting employment to grow by 17.8K.
On a more upbeat note, full-time employment grew by 28.8K in April. It just so happens that 30.0K part-time jobs got axed, resulting in a net loss in jobs.
Anyhow, the fall in employment didn’t push the jobless rate higher since it managed to hold steady at 5.8% as expected. However, a closer look a the details showed that the jobless rate held steady because the labor force participation rate dipped from 65.5% to 65.4%.
As for wage growth, the monthly reading printed a 0.19% increase, which is the same rate of monthly increase as in March. The year-on-year reading was rather impressive, though, since it came in at +3.60% (+3.25% previous), which is the strongest annual reading since August 2012.
Overall, Canada’s April jobs report was mixed. Net employment did print a downside surprise, though, so the Loonie took a beating across the board.
What’s expected this time?
- Net employment change: +17.0K to +19.0K expected vs. -1.1K previous
- Jobless rate: steady at 5.8% expected
- Labor force participation rate: steady at 65.4% expected
There’s no real consensus with regard to jobs growth. However, most guesstimates fall between +17.0K to +19.0K. There’s therefore an implied consensus that jobs growth recovered after shedding 1.1K jobs previously.
The expected recovery in jobs growth is not expected to have an impact on the jobless rate and labor force participation rate, though, since they’re expected to hold steady at 5.8% and 65.4% respectively.
So, do the leading labor indicators offer any clues?
- Markit’s manufacturing PMI report noted that “Greater workloads and long-term business expansion plans led to a relatively strong rise in staff hiring in May.”
- The Ivey PMI’s employment sub-index jumped from 57.0 to 61.2, which means that employment grew at a faster pace in May.
As for historical tendencies, the consensus that jobs growth recovered does seem to have a historical basis since jobs growth in May is usually stronger compared to April. However, that has not always been the case since jobs growth was slower from 2008 until 2012.
Economists tend to be too conservative with their guesstimates, though, resulting in more upside surprises.
In summary, there’s no true consensus on how jobs growth will turn out. Most guesstimates fall between +17.0K to +19.0K, though, so there is an implied consensus that jobs growth recovered in May. And that consensus is supported by the available leading indicators, as well as historical data.
However, historical tendencies also show that economists tend to be too pessimistic with their guesstimates since there are lots of upside surprises. And that, in turn, skews probability more towards a possible upside surprise, at least with regard to jobs growth.
But as always, just be reminded that we’re playing with probabilities here, so there’s always a chance that jobs growth will surprise to the downside instead.
Also, just remember that traders usually have their sights on jobs growth. If jobs growth surprises to the upside, the Loonie usually get kicked higher. But if jobs growth disappoints, then the Loonie usually gets dragged lower. And a classic example of the latter is the Loonie’s slide in the wake of the previous jobs report.
As for follow-through buying or selling, that usually depends on oil prices, so make sure to keep an eye on oil prices. And if you didn’t know, you can check real-time prices of oil futures here and here.