Canadians & US Employment Update
Today’s employment data demonstrates the stark differences in the response to Omicron between the US and Canada.
US Employment numbers far exceed expectations:
· Employment rose by 467k (125k expected)
· Labour Force participation rate – 62.2% (61.9% expected)
· Wages rose by 0.7% (0.5% expected) bringing the YoY increase to 5.7%
Conclusion:
Despite more people returning to the job market (as the Federal Reserve has been hoping for), their return is doing little to dampen wages. As a sign of just how acute the labour shortage is, the numbers suggest employers were more concerned with holding onto their staff despite the Omicron slow down.
This does little to suggest that inflation pressure will abate quickly. The risk is growing that the Federal Reserve will need to raise rates to 2% or higher over the next 18 months.
The Canadian job data was far worse than estimated:
· Employment fell by 200,100 (loss of 110,000 predicted)
· Unemployment rate rose to 6.5% (6.3% expected)
· Losses were concentrated in sectors greatly impacted by Omicron shutdowns
Conclusion:
The Bank of Canada expected weak data. We expect them to raise rates in March, however, the pace of rate hikes may be impacted by the speed of the rebound in employment.
