Forex Trading Guide: Canadian Jobs Report (Nov)

Planning on trading the news during this event-filled week? Well I’ve got a quick Forex Trading Guide for the Canadian jobs report that might help you score some pips. Let’s get started, shall we?

What is this event all about?

Jobs reports are considered leading indicators of economic performance, as a stable labor situation boosts consumer confidence and spending. This then keeps domestic demand healthy, which is good for business activity. On the other hand, a weakening labor market could lead folks to be tight-fisted with their hard-earned cash, keeping a lid on purchases and production.

In Canada, the jobs report is comprised of two main components: the employment change reading and the unemployment rate. The former indicates the increase or decrease in the number of employed Canadians over the reporting period while the latter shows the percentage of the total work force that is jobless and actively seeking employment.

How did previous releases turn out?

The headline jobs numbers have been looking pretty good, as the Canadian employment change figure has come in positive and higher than consensus in the past three releases. However, things aren’t looking so good beneath the surface since majority of the employment gains were simply spurred by part-time hiring.

Now part-time employment ain’t necessarily bad but these positions don’t contribute much to long-term jobs growth. For instance, the October report indicated that 35.4K out of the 44.4K positions added during the month were from election-related hiring. Meanwhile the natural resources and energy sector continued to shed jobs since falling oil prices have been forcing companies to scale back production.

What’s expected this time?

The Canadian jobs report for November is up for release on December 4 (Fri) 2:30 pm GMT and is expected to show a 0.7K drop in employment, enough to keep the jobless rate unchanged at 7.0%.

With the Canadian federal elections already over, analysts predict that there wouldn’t be much part-time jobs added during the previous month. Full-time hiring trends haven’t been so upbeat in the past few months, which is probably why a negative figure is expected this time. To top it off, further layoffs in oil-related companies might have still weighed on jobs growth.

How might the Loonie react?

A larger than expected drop in employment could mean more trouble for the Canadian economy, yielding a bearish forex reaction from the Loonie. On the other hand, stronger than expected jobs data could show reflect jobs market resilience, keeping the Canadian dollar afloat against its forex counterparts.

Of course traders are likely to take a closer look at the underlying components of the report to gauge whether the headline figures are misleading or not. Another month of mostly part-time hiring gains could keep the Loonie’s gains in check while a strong pickup in full-time employment could spark a very bullish reaction.

Keep in mind, however, that the Canadian employment figures are set to be released at the same time as the U.S. non-farm payrolls report, which is notorious for stealing the USD/CAD show. If you’re looking to focus on the Loonie’s forex reaction, don’t forget to check out the currency crosses such as EUR/CAD or NZD/CAD. Oh, and lemme remind you that the OPEC meeting is also scheduled close to this jobs release so that might shake things up a bit!