Traders will turn focus on employment and earnings reports in the coming week. Payroll reports are out in both Canada and the U.S. on Friday, and the flow of earnings reports will continue all week long.

RBC Financial says, for the upcoming week, January’s job numbers for Canada will be the big story and will be released early Friday morning.

January’s business conditions survey is due out on Wednesday, followed by December building permits and the January Ivey Purchasing Managers Index on Thursday, it notes.

“In Canada, earnings news will remain in focus, but Friday’s employment data also bear a close look,” says CIBC World Markets. “The fourth quarter puzzle has been that huge job gains have not been matched by output. While our forecast is only a touch below consensus, the risks lie towards a weaker number if we start to see staffing levels more attuned to output realities.”

BMO Nesbitt Burns says that Canadian job growth is expected to be hit with a dose of reality in the months ahead after a surprisingly perky performance in the last four months of 2003. “We look for job growth to simmer down considerably in January. The hiring freeze in Ottawa and spending restraints in many provinces will crimp public sector employment, a major source of support last year. The exceptionally harsh weather in the month could dig into construction payrolls. Finally, a spate of announced layoffs in manufacturing may be reflected in this report,” it says. “On balance, it stands to reason that the economy will do well to produce any job gains. However, we are looking for a gain of 10,000, simply because the Canadian labour market has surprised to the high side for the past two years.” It also expects the jobless rate to hold steady at 7.4%, with the risk tilted to a small rise.

Next week will be a busy one for U.S. data fiends. On Monday, December construction spending and personal incomes are due out, along with January’s ISM index, RBC says. And, it notes that, the non-manufacturing ISM report is out on Wednesday together with December factory orders, Thursday sees the release of fourth-quarter non-farm productivity numbers and weekly claims data.


“The big day, however, has to be Friday, with its release of January non-farm payrolls,” RBC notes. “Markets have been desperately waiting to see some convincing gains in employment, and all forecasts point in that direction. In one week, we’ll find out how close those forecasts are to being right.”

“Non-farm payrolls should finally live up to their advance billing, but we are a long way from being able to declare victory over labor market troubles after such an extended period of lackluster hiring,” CIBC says. “Monday’s personal income/spending data were already subsumed (with revisions) in the Q4 GDP figures, and a reasonably solid ISM report looks to be in the bag in light of other surveys.”

Market expectations for upcoming data represent high hurdles for the actual reports to jump, Nesbitt says. “The critical factory ISM survey out Monday is expected to climb to 63.8, a reading that points to robust growth in manufacturing output. Similarly, a 60 handle is placed on the non-manufacturing survey due Wednesday, again suggesting gung-ho growth. Finally, after months and months of delay and disappointment, economists believe that the time for job growth is now, with 175,000 net new jobs penciled in for the January payroll survey,” it says. “We are optimistic, but not materially more optimistic than that set of numbers. If we can hit those targets, opinions about Fed tightening may harden a notch and the equity market should regain some footing.”

Outside of the usual data slate, CIBC advises that players should, “Watch for any leaks ahead of the Feb 6-7 the G7 Finance Minister’s meeting, which in our view, will fail to deliver any serious verbal support for the US dollar.”

“The U.S. dollar’s rebound this week has eased some of the pressure in the lead up to the meetings next week, but the greenback will still be a subject of much discussion – as will the massive U.S. fiscal and trade deficits,” Nesbitt agrees. “European officials are becoming increasingly uncomfortable with the euro carrying the bulk of the burden in the adjustment to a lower dollar, and are fearful of the growth consequences of further euro strength. However, the ECB has thus far shown no inclination to cut rates. Asian nations will again come under pressure to allow a greater degree of currency flexibility.”