(July 7 – 11:20 ET) – This morning’s jobs report puts the Bank of Canada on the sidelines and pressure on the Canadian dollar, economists are saying.
The Canadian employment number came in far below expectations for June, declining by 14,100. This was the first monthly setback since January 1998. Full-time employment is down 25,300, led by goods industries. BMO Nesbitt Burns says “much of the extreme weakness in the release can be attributed to a sharp drop in youth employment.” Wage growth was also flat.
Without signs of labour market pressure BMO Nesbitt concludes this report puts the Bank in wait-and-see mode. However Nesbitt expects growth to rebound later in the summer.
CIBC World Markets is worried the weak report heralds slower growth. “Today’s weak employment data clearly poses a downside risk to our forecast, which is consistent with growth below the 3% mark”
The U.S. jobs report was off target, too. Economists are calling for the Fed to back off. “Despite what looked like a shocking headline, the underlying pace of U.S. nonfarm payroll gains largely conformed to expectations in June,” says BMO Nesbitt Burns. Private sector employment growth was almost entirely offset by census worker layoffs. However, growth was weaker than it has been on both sides of the ledger. The unemployment rate and wage gains came in on target.
BMO concludes that the report is “generally bullish”, and consistent with the “slowdown theme”. BMO maintains that the Fed will stand pat on rates, pending data that convinces it otherwise.
CIBC World Markets agrees. It is calling for a rate hike in August, but says, “we will have to see a pickup in July data to be on track for our call for a 25 basis point hike at the August Fed meeting.
-IE Staff