(March 7 – 17:25 ET) – Markets received mixed signals from today’s economic data, putting the focus on this Friday’s employment numbers for clarification.

January was the best month ever for the issuing of Canadian building permits, suggesting there are no signs of a recession in the construction sector at least. But the Help Wanted Index for February fell sharply, suggesting the job market is getting tougher in response to a worsening economy.

BMO Nesbitt Burns says not to take the good news too seriously, suggesting that the spike in building permits likely has as much to do with milder weather as it does with strong demand. Although BMO Nesbitt Burns concedes that signs of strength are good.

Merrill Lynch Canada agrees, but points out, “Nonetheless, the real question is whether the red-hot construction industry can offset the weakness seen in the manufacturing sector.”

The jobs picture indicates perhaps not. BMO Nesbitt Burns says, “the slide in the Help-wanted Index shows that a broader slowdown is truly underway.” It notes that the index provided “a sharp contrast with the upbeat construction results, and is quite consistent with the story of a broader slowdown”.

The index fell 3.4% in February, with nine provinces reporting declines, including a particularly sharp slide in B.C. “The soft result points to some downside risk for Friday’s key employment report,” says BMO Nesbitt Burns. The firm is looking for a small increase of 5,000 jobs and a rise in the jobless rate to 7%.

Merrill Lynch Canada says the sharp drop in the index also puts downside risk into its call, which was already below consensus. It sees flat growth and an increase to 7% in the jobless rate, too.
-IE Staff