Canada: Employment growth forecasted to slow to a 10k pace in April - TDS

In view of the analysts at TDS, Canadian employment growth is forecasted to slow to a 10k pace in April for the weakest month since November.

Key Quotes

“Hiring is likely to skew towards part-time employment, which has seen almost no increase over the last 6 months in a sharp contrast to the 30k/ month average for full-time employment. We could also see an underperformance in the goods producing sector amid a declining rig count. New tariffs on softwood lumber may have a material impact on employment in the forestry industry, however this is more likely to show up in the May data as the announcement came after the reference week for the survey. Meanwhile, a material decline in economic slack could begin to put upward pressure on wages, which have been a persistent source of disappointment over 2017. The unemployment rate should hold steady at 6.7% amid a modest increase in the labour force.”

“Once again, the market reaction will be contingent on the competing release of US nonfarm payrolls for April, where we expect a pickup in wage growth to drive a hawkish reaction.”

“Foreign Exchange

USDCAD will have a fair amount of event risk to chew on Friday. First, the Canadian employment report will have to compete with headlines from NFP. For the US, we expect a softer headline but anticipate a pickup in wages (0.4% m/m versus 0.3% for consensus). The latter is arguably more important for the Fed at this stage. We also note that the greenback is running well below levels implied by rate spreads so further evidence of US price pressures extend into a better tone for the greenback. Second, on the Canadian side, we look for a modest pullback in the net change of employment. Under the hood, the details will matter most with further signs of a rotation to full-time from part-time key for CAD.

The distribution of forecasters is also leaning a bit to the soft side, together with the recent price action in CAD, increases a low bar for a the currency to rally. The host of Fed speakers slated to hit the wires tomorrow also increases the two-way risks for FX markets into the weekend. On net, we still the upside for USDCAD limited here and especially with the pair stabilizing ahead 1.3750.”