The Canadian dollar sits almost flat when compared with Monday’s open despite today’s data showing the economy shed 212,800 jobs in January. This came as a surprise to analysts, who had roughly expected just slip in net employment of just 40,000, and resulted in the unemployment rate climbing from 8.8% to 9.4%.
The effects of the data release on the loonie were offset by a similar negative surprise in the US Nonfarm payrolls data, which undershot expectations to print at just +49,000, along with the details of the labour force survey highlighting the potentially temporary nature of the drop in employment.
The labour force survey highlighted that the sizably negative print in today’s data was due to the effects of December’s reference period occurring so early in the month (6th-12th December). After which, a number of provinces extended lockdown measures in response to increasing Covid-19 cases, while some including Quebec would close non-essential retailing and implement curfews. The closure of non-essential retail explains why the number of job losses are so high and concentrated on part-time workers. In comparison, employment levels in full-time work actually rose by 12,600, largely due to the 40,000 person jump in construction employment. Additionally, job losses were concentrated in Quebec and Ontario, which saw net employment losses of 251,000, while employment numbers actually increased in other provinces except Newfoundland and Labrador.
Taken on the whole, while the labour force survey marked a dramatic unwinding in the labour market recovery, setting it back to levels not seen since August 2020, the effects look temporary and subject to the stringency of lockdown conditions.
Loonie unfazed by the unwravelling of Canada’s labour market recovery to sit flat against the dollar when measured over the course of the week
Author: Simon Harvey, FX Market Analyst