The headline Canadian jobs gain was a positive surprise today but digging into the details tells a different story. Virtually all the job gains were in government jobs and the unemployment rate rose to 6.8% from 6.6% in another jump in population estimates.
Canada unemployment rate
The jobless rate at 6.8% is now the highest since September 2021 and much higher than the pre-pandemic rate of 5.9%. Before the pandemic, the BOC overnight rate was 1.75% compared to 3.75% now and if you go back to 2017 when unemployment was at similar levels, the BOC was at 1.00%.
The thinking in the market is that the Bank of Canada is well-behind the curve and the market is now pricing an 80% chance of a 50 bps cut next week from about 50% before the data.
Layer in government estimates for a decline in population next year and ongoing stresses in housing and you have a recipe for a struggling economy. With that, the Canadian dollar is on track to close at a four-year low.
Looking at the USD/CAD chart, it busted through 1.41 and is within striking distance of the cycle intraday high of 1.4178 set late last month.
USD/CAD daily
Looking at the bond market, there is some help coming to Canadian mortgage holders with 5-year benchmark Government of Canada yields down 12 bps today to 2.82%, which is back to early-October levels.
GCAN 5s
A wide spread is opening up against similar US yields, which are trading at 4.03% today. That should keep pressure ont eh currency.