Canada: Employment forecasted to rise by 20k in September - TDS

In view of analysts at TDS, the Canadian labour market is expected to remain on firm footing in September, with net employment forecast to rise by 20k.

Key Quotes

“This report may be noisier than usual due to the presence of some large moves in last month's data - full and part-time job growth diverged by 210k in August. For September we see scope for full time jobs to outperform in September. On the industry breakdown, we expect to see strength in goods producing employment, led by a rebound in manufacturing.” 

“Adding to the upbeat tone of the jobs report will be wages. Wage growth has been on a steady uptrend since bottoming in April and we expect further improvement in September. This is due to the combination of diminishing labour market slack as well as favourable base-effects, which could combine to push wage growth for full time employees toward 2% from 1.7% y/y. While important to the BoC policy outlook, Poloz likely seeks additional evidence on firming wage growth in line with his recent remarks.”

“Finally, unemployment rate is likely to drift higher to 6.3% on an increase in labour force participation, and in this case we recommend fading any uptick. In sum, higher wage growth and a pickup in full-time jobs argue for a hawkish report.”

“Foreign Exchange

The burden of proof has shifted back to the data for CAD, though following Governor Poloz’s backpedal at last week’s speech, the bar for incremental CAD strength has shifted higher. We think this has made CAD more vulnerable to data disappointment (especially as the BoC is well priced into the Dec/Jan FADs), as it may reinforce the more cautious narrative from the Governor. In this release, we are more concerned with the full-time/part-time composition which took a turn for the worse in the prior report, though the evolution has been constructive overall. We will also pay close attention to the wage metric which should continue to be supported. Taken in conjunction with what will be a noisy but still decent US payrolls report (owing to hurricane distortions) leaves USDCAD unappealing to trade. We are inclined to view the Canadian jobs data as the more important driver for now but not enough to break out of a range; we spot strong resistance at 1.2550 followed by 1.2650, with solid supports near 1.2400/50.”