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CANADA: 50/50 Odds Of BoC Upsizing To 50bp Sensitive To Upcoming Jobs Report

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  • The labour force survey for September headlines today’s domestic docket at 0830ET (landing simultaneously with US PPI) although is followed up by the important BoC BOS/CSCE surveys for Q3 at 1030ET.
  • Bloomberg consensus sees employment growth of 27k in Sep after 22k in Aug, not enough to offset still strong labour force increases with the unemployment rate expected to round up to 6.7% from 6.63% in August for a fresh high since Sep 2021.
  • We noted yesterday the wide range of analyst views from domestic banks, ranging from 10k-60k for overall jobs growth. A good part of this seems to be down to recent discouragement of 15-24 yr old workers, where the youth u/e rate surging to 14.5% (+3.2pts in the ytd) has helped see participation rates plunge along with the government’s attempt at limiting non-permanent resident immigration.
  • Note though that when it comes to interpreting this youth u/e rate rise, we'd be careful fading any further strength as Governor Macklem has previously seemed its increase, along with those of recent arrivals, as a sign of emerging labor market slack.
  • We have recently put most focus on the u/e rate as the single most useful metric for driving the market reaction but outright jobs growth is also going to be important. Gov Macklem last month noted the broad theme that businesses are hiring but more slowly than people entering the labour force. Importantly, hasn’t seen a big change in layoffs but it would be a “concern” if this were to change.
  • August saw a return of a much greater share of population growth showing up in the labour force and it's possible that simple volatility sees this reverses this month, putting some downward pressure on the u/e rate.
  • Monetary policy lags mean that Macklem won’t be surprised if these is “some further adjustment in the labour market” which sees the u/e rate push higher, but we think it would need to see a larger increase than the 6.7% expected to justify an upshift to a 50bp cut later this month from the three 25bp cuts it’s already done.
  • BoC-dated OIS pricing 38bps could be sensitive to hawkish surprises here. 
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  • The labour force survey for September headlines today’s domestic docket at 0830ET (landing simultaneously with US PPI) although is followed up by the important BoC BOS/CSCE surveys for Q3 at 1030ET.
  • Bloomberg consensus sees employment growth of 27k in Sep after 22k in Aug, not enough to offset still strong labour force increases with the unemployment rate expected to round up to 6.7% from 6.63% in August for a fresh high since Sep 2021.
  • We noted yesterday the wide range of analyst views from domestic banks, ranging from 10k-60k for overall jobs growth. A good part of this seems to be down to recent discouragement of 15-24 yr old workers, where the youth u/e rate surging to 14.5% (+3.2pts in the ytd) has helped see participation rates plunge along with the government’s attempt at limiting non-permanent resident immigration.
  • Note though that when it comes to interpreting this youth u/e rate rise, we'd be careful fading any further strength as Governor Macklem has previously seemed its increase, along with those of recent arrivals, as a sign of emerging labor market slack.
  • We have recently put most focus on the u/e rate as the single most useful metric for driving the market reaction but outright jobs growth is also going to be important. Gov Macklem last month noted the broad theme that businesses are hiring but more slowly than people entering the labour force. Importantly, hasn’t seen a big change in layoffs but it would be a “concern” if this were to change.
  • August saw a return of a much greater share of population growth showing up in the labour force and it's possible that simple volatility sees this reverses this month, putting some downward pressure on the u/e rate.
  • Monetary policy lags mean that Macklem won’t be surprised if these is “some further adjustment in the labour market” which sees the u/e rate push higher, but we think it would need to see a larger increase than the 6.7% expected to justify an upshift to a 50bp cut later this month from the three 25bp cuts it’s already done.
  • BoC-dated OIS pricing 38bps could be sensitive to hawkish surprises here.