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US Jobs Surprise, Canada Disappoints



Underlying concerns about US labor market ease after two robust reports.

Sept Fed views will not change much.

Canada’s data is disappointing, BOC optimism may be challenged.

United States

Nonfarm payrolls

The market’s angst over the underlying trend in the US labor market eases with the help of the second consecutive robust report. The 255k rise in non-farm payrolls was well above expectations, and the details were mostly favorable. There were upward revisions to the May and June reports.

Nonfarm payrolls

Monthly NFP Change – click to enlarge.

U.S. Unemployment Rate

The underemployment rose to 9.7% from 9.6%, which may have been the only poor element of the report.

U.S. Unemployment Rate

Click to enlarge.

U.S. Participation Rate

The 9k increase in manufacturing and the overall rise in the workweek bodes well for output.  The participation rate ticked up.

U.S. Participation Rate-2

Click to enlarge.

Average Hourly Earnings

Average hourly earnings rose by 0.3%, a little more than expected, and when rounded, the year-over-year rate of stayed at 2.6%, which matches the cyclical high, and will likely support consumption. 


Average Weekly Earnings

Average Hourly Earnings – click to enlarge.

The renewed vigor in the US labor market is helpful, but it does not address the main headwinds on the US economy, which explain the sub-2% annualized pace of growth over the past nine months. That weakness stems from the dramatic inventory liquidation cycle and ongoing poor business investment.   Nevertheless,  we suspect that the strength of the labor market undergirds the confidence of Fed policymakers.  Real final demand (GDP excluding inventories and trade) appears to be understood as a more reliable guide.

Canada Employment Rate

Canada’s employment report was poor. Canada lost 71.4k full-time jobs in July after businesses shed 40.1k in June.

Canada Employment Change

Click to enlarge.

Canada Unemployment Rate

 The unemployment ticked up (to 6.9% from 6.8%), while the participation rate slipped to65.4% from 65.5%.  

Canada Unemployment Rate

Canada Unemployment Rate – click to enlarge.

Canada Participation Rate

The Canadian participation is nearly three percent higher than the American one. On the other side, Canadian unemployment is two percent higher.


Canada Participation Rate

Click to enlarge.

We do not expect today’s jobs report to significantly boost the market odds of a Fed move in September. There are too many moving pieces, and the meeting is not until late-September.  Still, the data may limit how far the dollar will fall after appreciating (on a real trade-weighted basis) for the past three-months.



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Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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