Canadian employment likely to have dropped in January, jobless rate to have come in at 5.8 pct

Canadian employment is expected to have dropped in the month of January. According to a TD Economics research report, employment is likely to have recorded a net loss of 12k. The pullback is coming off a string of more than 12 months of straight gains, which have averaged 64k in the fourth quarter. The minimum wage hike in Ontario, which was implemented on 1 January, might result in job losses reaching 90k over the midterm. Therefore, Ontario is expected to have underperformed in January and drive the net loss of jobs, stated TD Economics.

In line with the deceleration in employment, the jobless rate is expected to have risen to 5.8 percent. Wage growth is expected to have countered the softness in jobs. Average hourly earnings are expected to have risen significantly from the 22 percent rise in the Ontario minimum wage.

“We look for average hourly earnings of permanent employees, our preferred measure, to jump to 4 percent y/y from 2.9 percent y/y in December”, said TD Economics.

Therefore, the LFS report is expected to send mixed signals and markets might be grappling with softness in jobs but a sharp rise in wage growth on account of the Ontario minimum wage hike.

“Because we see wages as a lagging indicator relative to jobs, and because the monthly surge in wages will be largely driven by a one-off policy adjustment, we expect the Bank to be concerned by the underlying trends in the labour market and focus more on jobs this month”, added TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 26.3439, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 36.8652. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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