Canada: Expect a soft job report in January - TDS

Analysts at TDS expect a soft job report in January for Canada and forecast a net loss of 12k.

Key Quotes

“The pullback is coming off a string of over 12 months of consecutive gains, which have averaged 58k in Q4. The minimum wage hike in Ontario, which was implemented on January 1, should lead to job losses totaling 90k over the mid-term. As a result, we expect Ontario to underperform in January and drive the net loss of jobs. Consistent with the slowdown in employment, we expect the unemployment rate to hold steady from the revised 5.8% in December. Offsetting the weakness in jobs will be wage growth, where we anticipate a significant jump in average hourly earnings from the 22% increase in Ontario's minimum wage. We look for average hourly earnings of permanent employees, our preferred measure, to jump to 4% y/y from 2.9% y/y in December.”

“This report should send mixed signals and markets could grapple with weakness in jobs but a surge 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.”

“FX: The making of a bear market correction in the greenback, along with the potential for a soggy data release at home, reinforce our bias that topside momentum in USDCAD remains strong. We target a near-term move to 1.2660.”