Notes from the Desk – CAD Employment Data – Is Bad News Good News?
Today’s headlines will focus on the loss of 17k jobs, but the ‘devil is in the details.’
The headline numbers.
- Employment fell 17.3k vs. expectation of rising 21k.
- Unemployment rate of 5.2% vs 5.1% expected.
- YoY average wage growth came in as forecasted at 5.1%.
The details.
- 77k jobs lost in the 15-24-year-old cohort (could there be a seasonal adjustment issue here with the summer hiring of students?).
- Goods and manufacturing sectors added 36k jobs while services lost 40k.
- Total hours worked dropped 0.4%, pointing to a weaker GDP print in May.
Implications.
Although this is the first negative job number in some time, there is too much noise in the data for the Bank of Canada to draw any meaningful conclusions.
In our opinion, wage growth of 5.1% and an unemployment rate of 5.2% are inconsistent with 2% inflation. As such, we expect the BoC to lean towards another 25bps hike either in July or September.
The bond market had already factored in at least one more hike, so today’s data should only have a modest impact on yields.
