- Canada is expected to report a loss of 175,000 jobs in April.
- A resurgence of COVID-19 in the northern nation may have hurt hiring.
- Growing demand from the US may turn defy gloomy expectations.
- The Canadian dollar is set to gain ground, yet America's Nonfarm Payrolls may cause jitters in USD/CAD.
Third time, another charm? Canada labor market figures have smashed expectations in both February and March – with the latter coming out at 303,100, more than triple the expectations. Will April also defy expectations? The nation's labor market figures have been volatile, and that is one expectation to why economists expect a loss of 175,000 positions in April.
Another cause of concern comes from coronavirus. Contrary to the most recent trends in Europe, the UK and the US, Canada suffered an increase in cases that also prompted new restrictions in several places.
Reasons to expect a better outcome
The virus has wreaked havoc on the labor market and also its statistics. Will there be another – perhaps last – move to the downside? There are reasons to cast doubts, as developed economies learned to adapt to lockdowns, with fewer struggles at every increase in infections.
Moreover, Canada is vaccinating its population, like its peers. Better prospects of the near future boost business confidence and could already be triggering more hiring than economists expect.
Yet perhaps the most important reason to expect a better Canadian jobs report – perhaps another month of hiring rather than job losses – comes from the south. The US economy is booming thanks to immunization and massive fiscal stimulus. The economic calendar is pointing to a surge of nearly one million jobs in America.
Therefore, as 75% of Canadian exports go south – where the population is nine times larger – there is a good reason to think that the rapid US expansion would also cause hiring in Canada.
Moreover, oil prices gradually increased in April, potentially causing the industry to bring more people on board.
All in all, the forecasts seem too gloomy, and any upside surprise could move the loonie higher. It would join the Bank of Canada's announcement of tapering bond buys, a surprising move that already sent the C$ higher. In case, the gloomy predictions are correct, there is room to the downside for CAD, albeit limited.
Canada's jobs report is due out on Friday, May 7, at 12:30 GMT – just when the US releases its Nonfarm Payrolls report. As mentioned earlier, expectations stand at around one million after an increase of 916,000 in March.
With markets concerned about inflation, topping one million could raise speculation of a rate hike from the Federal Reserve and send the greenback higher. In that case, selling USD/CAD in response to an upbeat Canadian labor report would be unwise, but the loonie could gain ground against other currencies.
Canada is set to report a substantial loss of jobs in April, but there are reasons to expect the outcome would be better. That would help the loonie, but probably not against the dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.