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Loonie Takes Flight After Robust Jobs Report

Don Curren February 8, 2019

The Canadian dollar scrambled higher Friday morning after the monthly Labor Force Survey, a notoriously volatile data series, indicated 67,000 new jobs were created in the first month of the year, more than 10 times the number expected by economists.

The Labor Force Survey also indicated the unemployment rate increased 0.2 percentage points to 5.8% as more people looked for work in January.

Economists had expected a total of about 5,000 new jobs in January, down from the 9,300 recorded in January. They forecast that the unemployment rate would inch higher, rising to 5.7 % from the 5.6% achieved in December.

The currency market responded strongly to the news, with the Canadian dollar moving roughly 0.4% higher against its US counterpart immediately afterwards.

But Canada’s Labor Force Survey employment data is highly volatile on a monthly basis, and economists – and Statistics Canada itself – recommend looking to multi-month trends for a truer gauge of the labor market’s performance.

For that reason, the January jobs result likely won’t significantly change the widespread view that the Bank of Canada, which retains a nominal tightening bias with regard to monetary conditions, will proceed very cautiously on that front this year.

Annual earnings growth held steady at 2% in January, suggesting there are no immediate concerns for the Bank on the inflation front.

StatsCan said the number of people working in services-producing industries increased, led by wholesale and retail trade, professional, scientific and technical services, and public administration, while the number of workers in goods-producing industries decreased, most notably in agriculture.

Overall employment gains were entirely driven by private sector employees, while the number of self-employed decreased and the number of public sector employees was little changed, StatsCan said.

The Canadian currency has been taking its cues from the broader patterns of movement in the US dollar in recent sessions, and will likely revert to that soon.

Bottom Line: The Canadian dollar vaulted higher Friday morning after jobs data for January suggested employment growth far exceeding the expectations of economists in January. But many are skeptical of the validity of the employee-based jobs data on a monthly basis, and the report won’t prompt a reassessment of expectations that the Bank of Canada will proceed cautiously in raising interest rates.

Don Curren
Market Strategist and Content Editor

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