CAD Employment Report Ahead -  0830ET

• The Canadian employment report for April is released at 0830ET, the sole main labor report between the April and June BoC meetings.
• Consensus looks for a 20k increase in employment (ranging 10-40k) in April in what would be a mild recovery after a surprisingly soft -2k in March. For context, Jan and Feb averaged a 39k increase after the 25k averaged through 2H23.
• It’s not expected to be enough to stop the unemployment rate drifting another tenth higher to 6.2% after its surprise three tenth increase to 6.1% in March vs consensus of 5.9%.
• This is on the assumption of continued strong immigration-led population growth feeding through to the labor force.
• Hourly wage growth for permanent employees meanwhile is seen moderating from 5.1% to 4.7% Y/Y. It would be its lowest since the 3.9% of Jun’23 in what was the only time it hasn’t had a 4 or 5 handle since Apr’22.
• Despite being expected, we feel the realization of a 6.2% u/e rate would still see a build in June cut expectations, recently 16-17bps, seeing as Macklem has previously said the Bank simply needs to see more of the same recent readings to have the confidence to cut rates.
• That being said, after a pronounced increase in March, we feel risk is to the u/e rate surprising lower on the month. It has clearly trended higher over the past year (it was 5.0% in Apr’23) but with some month-to-month noise which shouldn’t be ruled out.
• CPI on May 21 will however provide a final significant tilt to market expectations.

Chart below shows a Sahm rule equivalent for Canada assuming a 6.2% unemployment rate in April.