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Labour Market Friday: US, Canada Set to Report on Jobs

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Labour Market Friday: US, Canada Set to Report on Jobs

Friday could be a pivotal day for the global currency markets, as US nonfarm payrolls and Canadian employment data are scheduled for release.

Both countries are expected to post solid job growth figures, supporting the view economic recovery is on track after a volatile first quarter.

The US economy contracted in Q1 for the first time since 2011, falling at an annual rate of 1 percent. Canada’s gross domestic product increased 1.2 percent annually, well below forecasts.

Economists forecast US businesses added more than 210,000 jobs last month, following a gain of 288,000 in April that was the biggest in more than two years. A panel of experts polled by Bloomberg expect the unemployment rate to increase from 6.3 percent to 6.4 percent.

Average hourly earnings are forecast to rise 0.2 percent, after stagnating the previous month.

Risk aversion crept into the forex market today as investors set their sights on US nonfarm payrolls. The US dollar index declined 0.26 percent to 80.45. The greenback pared its gains against the euro, which was reacting to the European Central Bank’s latest decision to cut interest rates and introduce a negative deposit rate.

The ADP payrolls report, which was released Wednesday, may have lowered expectations about tomorrow’s official jobs report. ADP said US business added only 179,000 payrolls last month, due largely to weaker gains in business and professional services.

The non-farm payrolls report could be a market catalyst tomorrow. A strong reading will buff up support for the US dollar and send the index higher. A reading similar to the ADP estimate will keep the greenback subdued across the board.

North of the border, official data is expected to show Canada’s labour market added 25,000 jobs in May. The unemployment rate is forecast to remain at 6.9 percent.

Canada’s unemployment rate fell to 6.9 percent in March, a pre-recession low, as overall employment increased 42,900. Overall employment declined nearly 29,000 the very next month.

Canada’s jobs report comes amid growing concerns about the lack of reliable data concerning the Canadian labour market. The federal Auditor General indicated last month that Statistics Canada’s labour force survey – the tool used to gather employment information – was too vague, and that it failed provide relevant information to job-seekers.

The Bank of Canada warned last month that the labour market recoveries in both Canada and the US since the recession are likely overstated, suggesting the unemployment rate probably exaggerated the performance of both countries.

Canada’s unemployment rate may have “modestly” overstated the extent of the labour market recovery, while the US rate may have “significantly” overstated it, the BOC said in its spring report.

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