Canada’s economy added another 90,200 jobs in August after posting a similarly elevated 94,000 net employment gain in July. This now leaves the overall employment just 0.8% below February 2020 levels, the closest it has been since the pandemic began.
The data has compounded positive sentiment around the loonie following an optimistic outlook from the Bank of Canada on Wednesday and Governor Tiff Macklem on Thursday.
The result of which is that the loonie now leads gains against a broadly weaker US dollar within the G10 today, as CAD trades close to 0.6% higher on the day. In conjunction with Macklem’s views on normalisation sequencing, today’s data has confirmed our view that the BoC is set to hike rates in H2 2022. However, should incoming data prove as strong as the recent labour market reports, our expectations of lift-off may be brought forward to Q2 2022.
USDCAD continues its drive lower following bumper Canadian jobs report
Not only was the headline employment figure impressive, but the underlying data was also robust.
Job gains were largely in full-time employment (+69,000) and concentrated within industries that were most affected by the pandemic, such as accommodation and food services. This puts the overall labour market recovery in a stronger position than if job gains were in part-time employment or in public administration and gives the Bank of Canada less wiggle room when discussing the labour market to talk about the unevenness of the recovery. The question going forward now is whether the Canadian economy can continue to support such elevated net employment figures, or whether the progress in the recovery will soon translate to an increase in wages and hours worked.
Canada’s hardest hit sectors are starting to recover jobs, smoothing out the labour market recovery
Author: Simon Harvey, Senior FX Market Analyst