Week in FX Americas – USDCAD Employment Disappointment Holds Pair

• US NFP comes in under expectations at 142,000
• Canada losses 11,000 jobs in August
• USD/CAD Flat as job softness cancels each other

Canada and the US were both on deck to release employment data that would boost the trend of recovery in North America. Instead both figures managed to disappoint.

The US Non-farm payrolls came in at 142,000. The first time in seven months that the figure has been below 200,000 new jobs. The lowest reading in the year so far. The unemployment rate did go down slightly to 6.1%. While there is a weak correlation between the private ADP payrolls and the NFP this time they both had a similar drop in expectations. Revisions to the July and June figures were upward of 3,000 for July and a whopping downward revision of 31,000 for the once reported 298,000 in June, now down to 267,000.

In Canada the expectations were for a modest gain of around 10,000 jobs. The actual was a loss of 11,000. The provinces of Ontario and Alberta known for manufacturing and energy commodities respectively were the biggest losers. Participation rate is at a 13 year low of 66%. The final headline number was a bad sign for the Canadian economy but digging deeper into the figures the fact that the private sector has shed 111,000 jobs in August was offset by a large gain of self-employed workers (87,000). Both figures are under scrutiny given their large amounts and the fact that StatsCan dropped the ball in July when it reported no growth, when in fact there was positive momentum for the economy.

The USD/CAD is trading below the 1.09 line. This year so far the Loonie has been able to print 1.06 only two times in the year. At the very beginning and in early July. Excluding those two points the currency has been stuck above or close to 1.09 for the whole year. The fact that the US posted lower than expected numbers helped the CAD maintain itself at current levels versus the USD. The NFP was bad for the US economy as markets wait for confirmation that the Fed is ready to hike interest rates in a move that will have global impact. On the face of it the numbers were not that bad for the US economy as the recovery trend is still present.

The Canadian numbers do hint at deeper malaise in the economy. The as of yet unexplained drop in private jobs versus the massive pickup in self-employed is not a good sign and even that did not manage to post a net positive number. Both numbers were close to 40 year records.

The larger story after the NFP is what kind of impact this could have on the Fed. Obviously there are still sectors where employment has not recovered, but waiting around for them to reach full recover might not be needed before launching a tightening monetary policy. Overall this was a good number, but it disappointed a market expecting a great headline figure. The Fed will look beyond the final number and rate to dig deeper into a healthy employment and just then it will start the interest hiking cycle.

Next Week For Americas:

After the roller coaster week that had a Russia-Ukraine escalation and ceasefire and the ECB finally announcing their asset backed securities program to try and get Europe back into growth territory next week’s schedule seems tame in comparison.

As someone who is starting to divide opinion on the global policy maker circuit Bank of England Governor has enjoyed both the title “rockstar” and “unreliable boyfriend” added to his resume. He will address the Trades Union Congress on September 9. Employment is the main indicator for the BoE and the Fed regarding raising rates, so the market will be paying attention to what Carney has to say in Liverpool.

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