Canada has had some good economic data recently, such as the retails sales figures which surprised substantially to the upside. But many analysts fret that it’s the last hurrah before the downturn. One of the people expressing that particular concern is notably important: BOC Governor Tiff Macklem.
For that reason, there is extra attention on the jobs numbers that will be released later today. Normally, Canadian unemployment data is obscured by the concurrent release of US NFP, but that’s not the case this month. So, the loonie could be in a better position to lead the market moves.
Downhill From Here?
The Canadian economy is expected to continue to add jobs in November, and even more than in October. But the consensus is that they will be for part-time jobs, showing continued weakness in the economy. Which has been something of a theme with Canadian data lately: It’s a mixed back. Good news is often quickly followed by bad news.
Seasonality is particularly a factor given how far north Canada is. Typically, business activity slows substantially through the winter, which will likely keep a damper on economic performance. Without the extra room for action for the BOC, and if crude prices remain depressed, it could mean the loonie could be headed downward. Even faster than its southern counterpart.
It’s Not Over Yet
In his most recent speech, BOC Governor Macklem reflected the mixed data out of Canada. On the one hand, he insisted that taking more action to curb inflation was definitely on the table. On the other, he worried that an economic downturn was imminent. Which the market would likely understand to mean no more hikes.
This is where the latest retail sales data comes in. If the jobs market remains stable, then people will still have money to spend. That could keep up the inflationary pressure, particularly through the winter when supply is often lower. At the last meeting, the BOC was primarily concerned with high core inflation driven by wage growth.
Where the Focus Could Be
The main headlines from the jobs data will naturally be the unemployment rate, which is expected to tick up to 5.8% from 5.7% prior. But that expectation comes along with an expected one decimal increase in the participation rate, which would imply the labor market is stable.
The number of jobs created is expected to increase to 20.0K from 17.5K in October. A beat of that number could get markets back to expecting a rate hike. Average hourly wages are expected to be well above inflation, and keep growing at an annual 5.0% rate.
A beat in the employment data could give the CAD a boost, pending other economic data that suggests weakness. The BOC is expected to debate a rate hike at its next meeting.
