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CANADA: Unemployment Rate Trend Sees Second 50bp Cut Firmly In Sights

CANADA
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  • The on balance weak Canadian labour report has seen expectations of a second 50bp cut from the BoC jump next week, currently at 44bp vs 38bp prior.
  • The Can-US 2Y yield differential has slid 4.5bps since the data to -118.5bps as it approaches lows since the late 1990s (vs -95bps pre-tariff threats on Nov 22).
  • An intraday USD recovery has seen further gains for USDCAD, most recently hitting 1.4157. It surged through resistance at 1.4090 (Dec 2 high) and nears the bull trigger at 1.4178 (Nov 25 high) after tariff threats.
  • That said, Canada's-linkages to the US despite the previous tariff threats nevertheless see Antipodeans and NOK underperform CAD on the day now despite CAD sliding 0.9% against the USD.
  • Employment growth jumped a seasonally adjusted 50.5k in November, double the 25k expected.
  • However, the labour force surging 138k (after heavily lagging prior population growth as flagged beforehand) meant the unemployment rate jumped from 6.49% to 6.84%. That’s far above consensus of 6.6% and its prior cycle high of 6.63% in August.
  • It was also supported by the prime age unemployment rate increasing for a fourth consecutive month in a steady upward trend, most recently from 5.61% to 5.75% for a fresh high since Sep 2021.
  • Further, hourly wage growth fell from 4.9% to 4.1% Y/Y for all employees (lowest since May 2022) or from 4.9% to 3.9% Y/Y for permanent employees (BBG cons 4.7).
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  • The on balance weak Canadian labour report has seen expectations of a second 50bp cut from the BoC jump next week, currently at 44bp vs 38bp prior.
  • The Can-US 2Y yield differential has slid 4.5bps since the data to -118.5bps as it approaches lows since the late 1990s (vs -95bps pre-tariff threats on Nov 22).
  • An intraday USD recovery has seen further gains for USDCAD, most recently hitting 1.4157. It surged through resistance at 1.4090 (Dec 2 high) and nears the bull trigger at 1.4178 (Nov 25 high) after tariff threats.
  • That said, Canada's-linkages to the US despite the previous tariff threats nevertheless see Antipodeans and NOK underperform CAD on the day now despite CAD sliding 0.9% against the USD.
  • Employment growth jumped a seasonally adjusted 50.5k in November, double the 25k expected.
  • However, the labour force surging 138k (after heavily lagging prior population growth as flagged beforehand) meant the unemployment rate jumped from 6.49% to 6.84%. That’s far above consensus of 6.6% and its prior cycle high of 6.63% in August.
  • It was also supported by the prime age unemployment rate increasing for a fourth consecutive month in a steady upward trend, most recently from 5.61% to 5.75% for a fresh high since Sep 2021.
  • Further, hourly wage growth fell from 4.9% to 4.1% Y/Y for all employees (lowest since May 2022) or from 4.9% to 3.9% Y/Y for permanent employees (BBG cons 4.7).