Notes from the Desk – North American Employment: Uncomfortably Robust
Neither higher rates, nor widespread predictions of an imminent recession are curbing hiring.
Canadian Employment:
- 10.1k gain which was in line with the consensus, however, the mix was strong, with 50.7k full-time jobs created and 40.6k part-time jobs lost
- The unemployment rate falls to 5.1% vs 5.2% (as expected)
- YoY hourly wage gains fall from 5.5% to 5.4% (meeting estimates)
US Employment:
- 263k jobs created, exceeding the 200k estimate
- The unemployment rate remains at 3.7%
- YoY hourly earnings surprisingly accelerated to 5.1% vs 4.6% expected
Implications:
Neither central bank will take much comfort from today’s data, as the labour market remains very tight, making it more difficult for inflation to fall quickly.
We expect both central banks to raise rates this month. While 50 bps seems highly likely from the Federal Reserve, it is a coin flip whether the Bank of Canada does 25 bps or 50 bps.
Today’s data ought to blunt the recent enthusiasm that a rate-cutting cycle is just around the corner. As such, we would not be surprised to see markets relinquish some of the recent gains in equities and yields.
The good news is that today’s data likely does not alter the expected terminal rate for either country (4.25-4.5% for Canada, and 4.75-5.25% for the US).
