Canada: Job growth likely to slow to a 5k pace in June - TDS

Analysts at TDS, suggest that Canadian job growth is forecast to slow to a 5k pace in June from the robust 55k in May.

Key Quotes

“Details should add a downbeat tone to the report, as we expect to see a partial reversal of last month's rotation into full time and private sector hiring. Manufacturing employment should cool after surging 25k jobs in May, its strongest month since 2002. We expect finance, insurance and real estate (FIRE) employment to remain soft amid a slowdown in the Toronto housing market, with the deceleration in home sales gaining momentum in June.”

“Due to sizeable base effects, we see limited scope for a pickup in average hourly earnings. If anything, risks are skewed for a drift lower from May’s 1.0% y/y.”

“The unemployment rate should remain stable at 6.6%, but we see risk for a drift lower to 6.5% on a moderation in labour force growth. The threshold for an improvement in the unemployment rate is quite low, given the unrounded rate last month (6.56%).”

“While no single data point will force the Bank of Canada’s hand next week, a softer read on job and wage growth would add to the list of reasons we expect the Bank to wait until October for liftoff.”

“Foreign Exchange

USDCAD will contend with lots of noise tomorrow morning, reflecting the cross currents of the US and Canadian employment report, G20 headlines and oil price movements. Given our house view of a stronger US report (on wages) and softer Canadian release, we think the risk/reward favours an upward bias in USDCAD on the releases. Indeed, a downside surprise in the Canadian release would be third downside miss of a tier one report over the past few weeks. In turn, Canadian data surprises peaked in April and momentum continues to decelerate while surprises are showing signs of stabilization in the US. With our HFFV model showing USDCAD close to fair value and positioning looking flat, we think divergence in tomorrow’s reports favours further consolidation in USDCAD. Topside resistance seen near 1.3016.”