Canada: Labour market to remain on a solid footing in November – TDS

Analysts at TDS expect the Canadian labour market to remain on a solid footing in November with the addition of 15k jobs, which should leave the unemployment rate at 6.3%.

Key Quotes

“We expect the details of the report to show an outperformance in the service sector. Parttime employment is also expected to rebound after the loss of 150k positions over the last two months. Average hourly earnings have risen by an average of 0.4% m/m since June and we expect a more moderate increase in November; but we see wage growth pushing to 2.5% y/y on account of base effects.”

“Lastly, rising labour force participation for young workers should help keep the unemployment rate stable at 6.3%. College students have been out of school since October 16th due to faculty strikes and we look for more students to seek part time work as the disruptions drag on.”

“Foreign Exchange

• CAD’s sensitivity to data surprises remains persistently high, so on balance, our expectations for marginally better topline GDP/ LFS should leave CAD bid. We note, however, that amidst the data dump, we are primarily focused on the wage data given the Bank has emphasized this as a variable they are closely watching. As we note above, we expect wages to make another push higher. Taken in conjunction with only 7 bps priced in for a January hike (our base case), we reckon that the risks for CAD around the data are asymmetrically tilted to the upside.
• We spot crucial resistance around 1.2920 followed by 1.2970/1.3000 (~200-dma). Initial supports come are located near 1.2800 and 1.2750. We are closely watching CAD crosses as well for additional follow through. In particular, EURCAD and GBPCAD have been bid in recent sessions and flirt with key levels; given interest to buy EUR and GBP as of late, we suspect that that could have some offsetting impact on a decline in USDCAD.”