CAD: Labour market to take a step backwards in November with the loss of 10k job - TDS

Research Team at TDS, is looking for the Canadian labour market to take a step backwards in November with the loss of 10k jobs, which should nudge the unemployment rate higher by 0.1pp to 7.1%.

Key Quotes

“While employment growth in November has historically skewed towards part-time workers, as businesses gear-up for the holiday season, the recent robust pace of part-time job growth and seasonal adjustments should limit any further gains in this segment of the labour market. Even with net job losses of 10k, a rotation towards full time hiring would be viewed as a positive development given the cumulative 1100 full-time jobs added over the last six months.”

“Looking to the industry breakdown, we expect to see a pullback in construction and "other services", while professional services hiring should rebound following the loss of 15k jobs in October. Given the competing release of nonfarm payrolls south of the border, we do not expect Canadian employment to drive much of a market reaction.”

“Foreign Exchange

We do not think the Canadian labour report will hold much credence (particularly given its notorious volatility/limited policy implication) for USDCAD. That said, recent price action in USDCAD has leaned heavy despite the OPEC deal so we think funds will be more sensitive to a positive data surprise. US payrolls complicates the reaction but we think that barring an outright horrendous non-farm number, the bar to derail market implied Fed expectations for December is exceptionally high, while on-consensus print or moderately better (~200k) reaffirms this view. The 1.3300 level acts as key near-term support, which broadly coincides with the 38.2% Fibo level from the 2016 high/ lows as well as the October highs.”