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Loonie Loses More Ground After Disappointing Jobs Data

Don Curren November 8, 2019

A disappointing read on Canada’s labor market in October added to the Canadian dollar’s woes this morning, with the loonie skidding to its lowest level since Oct. 14 on news that 1,800 jobs evaporated last month, a weaker performance than the gain of 10,000 anticipated by economists.

Statistics Canada said that, following two consecutive months of growth, the unemployment rate was unchanged at 5.5% in October as expected by the consensus view.

The economy lost 1,800 jobs, a marked contrast with the 53,700 added in September, it said.

Economists had forecast that about 10,000 jobs were added in October.

It’s important to remember that Canada’s Labor Force Survey is an exceptionally volatile data series and bear in mind that its extreme monthly fluctuations can be misleading. For a surer indication of the health of Canada’s labor market, StatsCan advises looking on employment change in terms of its trends over a multi-month period.

The number of public sector employees grew by 29,000 in October, following a similar gain in September, likely in large part reflecting hiring triggered by Canada’s federal election on Oct. 21.

On a year-over-year basis, public sector employment grew by 125,000, or +3.3%, StatsCan said.

While virtually unchanged in October for a second consecutive month, the number of private-sector employees was up by 260,000 (+2.2%) on a year-over-year basis, it said.

Construction employment fell by 21,000 in October, with declines in five provinces, led by Quebec and Ontario.

The number of people working in finance, insurance, real estate, rental and leasing increased by 18,000 in October, the second increase in three months. Employment in this industry was up 64,000 (+5.5%) compared with 12 months earlier.

Annual hourly wage growth was at 4.3%, unchanged from September.

After a strong performance against the greenback in October based in large part on expectations interest rates between Canada and the US would continue to diverge in Canada’s favor, the Canadian dollar suffered a “double whammy” on Oct. 30 when the Bank of Canada held rates steady but adopted a more concerned tone about the economy while the US Federal Reserve cut rates but insinuated it may not do so again.

The Canadian unit has deteriorated about 1% from that day, and unless the broader context changes materially in a way that benefits the Canadian dollar, it will likely continue to struggle in the coming sessions.

While today’s relatively nondescript report won’t have a large impact on expectations about monetary policy at the Bank of Canada, it does add some weight, on the margin, to the view the Bank could cut rates in next few months.

Don Curren
Market Strategist and Content Editor


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