For the week of July 9 – 13.
According to Statistics Canada, the unemployment rate for June rose to 6.0 percent due to a strong surge in the labour force of 76k. The Canadian economy added 32k jobs in June, while consensus expectations were for a 20k gain, with about 30 percent of the job gains coming in the full-time category (+9k). Goods producing jobs (+47k) saw a strong bounce back with gains coming in for both construction (+27k), and manufacturing (+11.3k). Service producing jobs were down (-15k), led by the wholesale/retail sector (-14k), and accommodation/food services down (-16k). On a regional level, Ontario (+35k), Saskatchewan (+8k), and Manitoba (+4k) added jobs in June, while the jobs market either remained flat, or shrank in other provinces.
The US June job report was strong with the US economy adding 213k jobs, exceeding expectations of 195k. The number of employed people in the workforce was up by 102k, and the number of unemployed people increased by 499k. Due to increased labour force participation, the unemployment rate increased to 4.0 percent from 3.8 percent. Goods producing jobs showed continued strength, with gains in both manufacturing (+36k) and the auto (+12k) industry. Service providers also boosted payrolls, led by education/health services (+54k), and professional/business services (+50k). Average hourly earnings saw an increase of 2.7 percent from the previous year, which was less than the expected 2.8 percent.
Scheduled economic data releases in Canada this week include housing starts, building permits, the new house pricing index, and existing home sales. Meanwhile, the Bank of Canada is scheduled to announce its rate decision on Wednesday. Consensus among economists surveyed by Bloomberg is for the Bank to increase its target for the overnight rate to 1.50 percent. Current market implied probabilities of a rate hike through OIS trading shows an 85 percent probability of a rate hike. Major releases in the US this week include PPI, CPI, the import price index, and the University of Michigan Sentiment gauge.
Both US and Canada government yields are trading 2 to 3bps higher with S&P futures higher (+9.4). The Canadian dollar is currently trading at 1.3075 against the US dollar; today’s expected range is 1.3025 – 1.3125.