CANADA DATA: Labour Force Survey Comes Into View Amidst Tariff Delay
Feb-06 18:45
- The labour force survey for January is released on Friday at 0830ET along with US payrolls. Consensus looks for Canadian jobs growth to fall back to a more typical 25k (sa) after a booming 91k in December and strong 44k in November.
- The unemployment rate meanwhile is seen increasing a tenth to 6.8%.
- It will be the first release that will fully reflect the annual revisions made on Jan 24, which were far-ranging and included some slightly weaker recent readings but ones that didn’t materially alter trends.
- The unemployment rate was unrevised at 6.71% in Dec, holding what was a surprise decline at the time, but after the upward revisions for the prior three months (Nov from 6.84% to 6.89%, Oct from 6.49% to 6.63% and Sep from 6.49% to 6.56%). The u/e rate is seen increasing a tenth back to 6.8%, close to November’s 6.9% that marks a cycle high having started 2024 at 5.7% and 2023 at 5.1%.
- We see risks to the downside for employment growth, primarily down to the volatility in the data but also some notably weaker recent trends in the separate payrolls data [see chart].
- However, labour force growth could also be due a softer print after two strong months, potentially limiting unemployment rate changes. This should see a broad continuation of the existing trend of a softening labour market, but one that the BoC is hoping will dissipate having cut 200bp since June last year and with rates back into the higher end of neutral estimates.
- There are some upside risks to jobs growth though, in part from a more pronounced pick-up in temporary restaurant hiring and other industries looking to capitalize on the GST/HST holiday. This can have an added boost considering a recent trend of increasingly favorable seasonal factors for overall part-time positions in January (biasing the seasonally adjusted level higher for a given level of non-seasonally adjusted employment).
- Going against this is the fact that 2023 and 2024 saw the lowest January seasonal factors in recent decades for total employment, and if that trend continues it could act as a drag on headline jobs growth shown on screens.
- There is 19-20bp of cuts priced for the BoC decision on Mar 12 but we feel this report has less potential to alter this than usual, barring a particularly weak outturn. There is still another labour force survey for February (Mar 7) and, more importantly, the 30-day US tariff delay deadline lands on Mar 4.
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STIR: FED Reverse Repo
Jan-07 18:20
RRP usage continues to recede, $208.296B this afternoon from $231.926 Monday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties slips to 56 from 57.
CANADA DATA: Trade Balance Remains Relatively Healthy But Still Exposed To US
Jan-07 18:16
- Building on what our policy team wrote on the Canadian trade data earlier today, the merchandise trade deficit was smaller than expected in November at C$0.3bn (cons C$0.9bn) after a downward revised C$0.5bn (initially C$0.9bn).
- It left a three-month annualized deficit of circa 0.3% GDP after the 0.5% previously.
- The services balance meanwhile keeps to a much healthier position than previously seen after recent revisions, worth a deficit of just 0.1% GDP when averaged over the past three months.
- Combined, the goods & services deficit was circa 0.4% GDP annualized in the three months to November. From a trend perspective it’s weaker compared to surpluses that peaked around 0.5% GDP in late 2023 but it’s still favorable in light of the 1-3% deficits typically run in pre-pandemic years.
- With Canada-US trade relations so keenly in the spotlight, the Canadian merchandise trade surplus to the US increased from C$6.6bn to C$8.2bn in November and continued to equate to 3.3% GDP on a twelve-month running basis.
- The latter is down from a recent high of 4.5% GDP in mid-2022 but remains notably above the 2% GDP averaged through the first Trump administration.
MNI EXCLUSIVE: ISM Services Head On Outlook Under Trump Administration
Jan-07 18:09
MNI spoke with the head of the ISM's service survey about the outlook under the Trump administration. On Main Policy Wire now, see sales@marketnews.com for details.
