Canada Unemployment Rate rises to 7.1% in August vs. 7% expected

Unemployment Rate in Canada rose above 7% in August.
USD/CAD trades little changed on the day at around 1.3800.

Eren Sengezer FXStreet

The Unemployment Rate in Canada rose to 7.1% in August from 6.9% in July, Statistics Canada reported on Friday. This reading came in worse than the market expectation of 7%.

"Employment declined by 66,000 (-0.3%) in August, largely the result of a decline in part-time work," Statistics Canada noted in its press release. Other details of the report showed that the Participation Rate edged lower to 65.1%, while the Average Hourly Earnings rose by 3.6% on a yearly basis.

Market reaction to Canada jobs data

USD/CAD dropped to a three-day low near 1.3750 in the early American session as the US Dollar (USD) came under heavy selling pressure following the disappointing employment data from the US, which showed Nonfarm Payrolls rose by only 22,000 in August. With jobs data from Canada falling short of expectations, however, USD/CAD managed to erase a large portion of its daily losses and was last seen trading at 1.3800, where it was down 0.12% on the day.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD gains traction above 1.3400 as softer US CPI dampens Fed rate hike expectations

The GBP/USD pair gains ground to near 1.3405 during the early Asian session on Wednesday. The US dollar weakens against the British Pound as softer-than-expected US inflation in June tempered expectations for US Federal Reserve policy tightening. The release of the US June Producer Price Index report will be in the spotlight later in the day.

EUR/USD gathers strength above 1.1400 after soft US inflation data

The EUR/USD pair gains ground to near 1.1425 during the early Asian trading hours on Wednesday. The US Dollar weakens against the Euro as softer-than-expected US inflation data temporarily eased pressure on the Federal Reserve. Traders will take more cues from the US Producer Price Index report, which is due on Wednesday.

Gold remains a ‘sell-on-rise’ trade amid US-Iran hostilities

Gold is resuming its downtrend toward two-week lows near $3,985 early Wednesday, following a temporary pullback seen on Tuesday, as there seems to be no end to the renewed hostilities between the United States and Iran concerning the Strait of Hormuz.

Hyperliquid representatives, Trade[XYZ] meet SEC Crypto Task Force to discuss digital asset regulation

The US Securities and Exchange Commission's Crypto Task Force met with representatives from the Hyperliquid Policy Center, XYZ Ltd., which operates Trade[XYZ] and Sullivan & Cromwell LLP to discuss regulatory approaches to digital assets, according to a memorandum released Tuesday.

2% and nothing else: Why Warsh gave Congress three hours of Greenspan

The Federal Reserve Chair who wants the institution to say less spent Tuesday legally required to say more, on the one morning the data handed him something pleasant to say. June's Consumer Price Index fell 0.4% on the month, the steepest single-month decline since April 2020.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.