The employment picture in Canada and the US seems to be diverging. Here are the numbers:
US Non-Farm Payrolls:
- 528k jobs added (250k expected)
- Monthly wage growth 0.5% (0.3% expected)
- Unemployment rate 3.5% (3.6% expected)
Canadian Labour Force Survey:
- 31k jobs lost (15k gain expected)
- Wage growth 5.4% (5.9% expected)
- Unemployment rate 4.9% (5% expected)
Implications for monetary policy
- With the Federal Reserve being data-dependent for each meeting, they remain on track to hike by at least 50bps in September
- Despite two months in a row of job losses, the low unemployment rate means the Bank of Canada remains poised to deliver a 50 bps hike in September
Implications for the bond market
Long-end rates could remain under upward pressure, as expectations for rate cuts in late 2023 fade. Furthermore, we think that the market will begin to price in the Bank of Canada to pause its rate hikes at a lower level than the Fed.
