Canadian Jobs Volatility: BoC Policy Implications

CAD: Jobs prints are volatile, but BoC should be done anyway

Canadian jobs figures for the month of August will be released today. The headline employment number has been quite volatile, with the past four months having seen two very strong prints (April and June) and two sub-zero ones (May and July). However, the unemployment rate has ticked up in each of the past four months, from 5.0 in April to the current 5.5%. The consensus numbers are 17.5k and 5.6% for today.

Outside of the initial reaction for CAD, the implications of today’s figures beyond the very near term should not be very significant, barring a very strong read. As discussed in our Bank of Canada meeting review note, we think rates have peaked in Canada, in particular following the dismal 2Q GDP reading (-0.2% quarterly, annualised).

USD/CAD is expensive, trading around 2.3% above its near-term fair value, according to our calculations, but any decisive turn lower remains tied to a turn in US activity data rather than domestic inputs on the Canadian side.