Canada: Employment continues to defy gravity – TDS

TD Securities analysts note that the Canadian labour force added 106.5k jobs in April, surpassing all reasonable expectations for labour market performance (consensus: 12k).

Key Quotes

“The unemployment rate fell to 5.7%, wage growth firmed to 2.6% y/y, and the 6-month pace of hiring now stands at 51k.”

“Hiring at this is pace is unsustainable against the muted growth backdrop even if the economy is expected to rebound in H2. However, it should make the Bank of Canada more comfortable to sit on the sidelines as the market prices in cuts.”

“Job growth was led by full-time employment (+73k) while private sector employment rose by 84k and wage growth firmed to 2.6% y/y. Furthermore, the unemployment edged lower despite over 100k joining the labour force, which help push the participation rate 0.2pp higher to 65.9% for the first time in two years. The six-month pace of job growth also pushed higher to 51k, surpassing the 48k level from February.”

“We still believe that recent labour market performance is not consistent with broader economic conditions and is unsustainable, although the magnitude of this month's outperformance suggests that the inherent volatility of the labour force survey is not the sole factor.”

“FX: While welcome news, the bid in the CAD is unlikely to persist for long without signs of an uptick in virtually all sectors of the economy. We also think the US/China trade impasse will persist for a while which does not bode well for the CAD and broader risk sentiment. As a result, we do not think a dip below 1.34 in USDCAD can persist for long.”

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