Twin US/Canada Jobs reports for August


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By: Andria Pichidi

USDCAD rallied to 1.3118 highs from 1.3078 lows following the twin US/Canada jobs reports. Both were close to consensus expectations, though the USD appeared to have received a broader bounce. The recent drop in oil prices has weighed on the CAD since then, with USOIL falling to just under the $41.00 mark since the data, down from earlier highs near $41.90. Thursday’s 1.3162 top marks resistance with the earlier lows marking support at 1.3078.

Elsewhere on the US Dollar rally, EURUSD fell from 1.1845 to near 1.1798, while USDJPY rallied to 106.44 from under 106.46. Equity futures improved but remain mixed, as the exodus from tech stocks continues. Yields edged slightly higher.

A closer look at the data

Canada’s employment improved 245.8k in August after the 418.5k increase in July, the record 952.9k surge in June, and 289.6k increase in May. Of course, the monthly job gains since May followed the largest-ever -1,993.8k plunge in April and a sizable -1,010.7k loss in March. Note that before March, a 100k monthly move was quite large for Canada employment. But that was then. The total jobs gains from May to July are 1,906.8k while the total jobs lost in March and April total 3,004.5k — so about two-thirds of those jobs have been recovered, consistent with the view that there is still a long way to go before the economy and labor market return to pre-COVID levels of activity. Full-time jobs grew 205.8k in August after a 73.2k rise in July. Part-time jobs were up 40.0k after the 345.3k jump in July. The unemployment rate fell to 10.2% in August from 10.9% in July, having peaked at 13.7% in May.

Overall, roughly as an expected report that supports the recovery story but also highlights the long journey faced by the economy to return to pre-COVID levels of employment and production. The BoC’s announcement next week is expected to reveal no change in rates and a reiteration of a whatever-it-takes policy outlook that is shared by the core central banks.

On the other hand in the US, the jobs report was stronger than suggested by the 1,371k payroll gain after -39k in downward revisions. We saw a rise in the workweek to 34.6 hours from an already-elevated 34.5 in July, which allowed a big 1.2% August hours-worked rise. We also saw a 0.4% August rise in hourly earnings, after a downward July bump to 0.1% from 0.2%, which left a big 4.7% y/y gain. The household survey revealed a 3,756k civilian job surge and a 968k labor force gain, leaving a jobless rate plunged to 8.42% from 10.03%. The labor force participation rate improved to 61.7% from 61.4%. The payroll gain was partly lifted by a 344k rise in government jobs after -50k in downward revisions, which mostly reflected temporary Census hiring.

Payrolls over the May-August period have now reclaimed 48% of the jobs lost in March and April, and the steep rebound extended through August. Yet, the slowing in the pace of private payroll growth, and the concentration of the joblessness in lower-paid workers, capture the labor market quagmire for those previously in the restaurant, airline, hotel, and entertainment industries.

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