What to Expect from Canadian Employment and USD/CAD Implications
The employment report from Canada is the main economic event on Friday, with expectations being mixed. The number of new jobs is expected to increase from almost flat in the previous month, however, the unemployment rate is expected to tick higher as well, reaching 5.9% in January from 5.8% in December.
The most current S&P Global PMI figures show that companies continued to cut employment numbers at the start of the year, but only modestly. This reduction was mostly due to lower production requirements and adequate personnel capacity. Furthermore, backlogs of work fell for the eighteenth straight month, demonstrating that demand remains challenging. Remuneration levels remain a focus, particularly in light of the Bank of Canada’s (BoC) findings. The BoC highlighted that labour market conditions have improved, with job openings reverting to pre-pandemic levels and new job creation falling behind population growth. Despite this, earnings have continued to climb, with average hourly pay for permanent employees rising by 5.7% year on year in December, up from 5.0%.
Officials have warned that continued wage growth in the 4-5% range, combined with slow productivity growth, could lead to higher inflationary pressures. According to analysts, such changes may offer hurdles for the future implementation of looser monetary policy measures.
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