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Friday’s Canadian Employment Report Key for Loonie

David Becker
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Canadian employment is expected to rise 30.0k in July after the 9.4k drop in June. The report is generally subject to monthly volatility, making this report’s implications for underlying growth somewhat more difficult than usual. Underlying employment growth has been tepid, with job growth averaging only 8.8k in the first half of 2014. An as-expected rebound in jobs would show that Canada’s labor market retains slack, supportive of the BoC’s dovish growth outlook.

The weak job growth during the first half of this year has been the fault of goods producers, which have shed a total of 22.0 jobs in the first six months of 2014. A 34.6k drop in manufacturing employment and 26.4k drop in forestry, fishing, mining, oil and gas were behind the contraction in goods sector jobs. Construction has been a bright spot, adding 42.7k jobs this year, although much of the gain was due to the 31.8k bounce in June. All of the net job growth this year has been due to service producing industries, which added 74.8k jobs in the first six months of 2014.

An as-expected employment report would underpin expectations for ongoing momentum in Canada’s economy during the second half, a scenario that was given added traction by the stronger than anticipated 4.0% rebound in U.S. Q2 GDP. Of course, the key for the BoC is the extent to which the second half matches their projections. At this point GDP is on track for growth in the 2.5% area, which would match the Bank’s estimates from the July MPR.

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