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CANADA DATA: Unemployment Rate Seen Nudging Back To Recent High

CANADA DATA
CanadaData BulletBulletMarketsFixed Income BulletsForeign Exchange BulletsNorth America
  • The Canadian labour force survey for November is expected to show employment growth of 25k (range 5-46k) after a modestly softer than expected 15k in October.
  • Focus should be on the unemployment rate again for a gauge of broader labour market slack. The unemployment rate surprisingly held at 6.49% for a second consecutive month back in October vs then-consensus of 6.6%, but the prime-age rate increased to new recent highs.
  • Analysts stick with their prior call for a one-tenth increase to 6.6% for which there is reasonable consensus (7 of 13 look for 6.6, 3 see 6.7, 2 see 6.5 and 1 sees 6.4). Its recent high of 6.63% in August was the highest since Sep 2021.
  • We agree with the risk of a drift higher as there’s an overhang from recent strength in working age population growth that hasn’t yet fed into the labour force. We did however see that same bias last month which failed to materialize.
  • Wage growth in this survey has taken a backseat recently, with the BoC looking at broader metrics. The limited survey responses look for a moderation from 4.9% to 4.7% Y/Y for the hourly wage rate of permanent employees although it remains robust. It has only been below 4.5% Y/Y once since Aug 2022. That's in an economy with productivity growth of -0.1% Y/Y as of Q3 (which was in turn its least negative since 3Q22).
  • This is the last major release ahead of the BoC decision on Dec 11. The decision is seen close to a 50/50 call between a second 50bp cut or shifting back to a 25bp clip, with 38-39bp of cuts broadly priced after soft latest momentum in GDP data, having been 33bp pre-GDP and less than 30bps after Trudeau’s fiscal stimulus package.
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  • The Canadian labour force survey for November is expected to show employment growth of 25k (range 5-46k) after a modestly softer than expected 15k in October.
  • Focus should be on the unemployment rate again for a gauge of broader labour market slack. The unemployment rate surprisingly held at 6.49% for a second consecutive month back in October vs then-consensus of 6.6%, but the prime-age rate increased to new recent highs.
  • Analysts stick with their prior call for a one-tenth increase to 6.6% for which there is reasonable consensus (7 of 13 look for 6.6, 3 see 6.7, 2 see 6.5 and 1 sees 6.4). Its recent high of 6.63% in August was the highest since Sep 2021.
  • We agree with the risk of a drift higher as there’s an overhang from recent strength in working age population growth that hasn’t yet fed into the labour force. We did however see that same bias last month which failed to materialize.
  • Wage growth in this survey has taken a backseat recently, with the BoC looking at broader metrics. The limited survey responses look for a moderation from 4.9% to 4.7% Y/Y for the hourly wage rate of permanent employees although it remains robust. It has only been below 4.5% Y/Y once since Aug 2022. That's in an economy with productivity growth of -0.1% Y/Y as of Q3 (which was in turn its least negative since 3Q22).
  • This is the last major release ahead of the BoC decision on Dec 11. The decision is seen close to a 50/50 call between a second 50bp cut or shifting back to a 25bp clip, with 38-39bp of cuts broadly priced after soft latest momentum in GDP data, having been 33bp pre-GDP and less than 30bps after Trudeau’s fiscal stimulus package.