StatsCan just reported our Canadian jobs report this morning at 8:30am. The country produced about the number of jobs Bay St Economists had expected at 22,200 new jobs. The Unemployment rate fell from 6.3% to 6.2%. On the surface, about as expected and all good.
Beneath the surface, the quality of those jobs gains were not so stellar. Of the 22,200 new jobs created, +110,400 of them were Part Time (PT) while Full Time (FT) saw a healthy retraction of -88,100. The reason why it is so important to differentiate between FT and PT jobs is that FT jobs offer more security and a better annuity for the worker which leaves that FT worker feeling more confident about their earnings stream and more willing to spend. PT employees do not feel that same sense of confidence - they are unsure about many things like, how many hours work they will get, whether they will be terminated tomorrow, etc. We call this "the quality of the job gains".
Interestingly today, we saw PT jobs gain by the second most in the past 30 years at +110,400 vs the highest at +136,300 in July 2010 (according to Bloomberg and StatsCan). Not a good sign - we would always want to see strong FT gains, not strong PT gains. PT job gains below:
And FT job losses at -88,100 for August were the third largest over the past thirty years. The only two other times the Canadian economy lost that many FT jobs over the past thirty years was in Feb 2009 when it lost -120,100 FT jobs and in July 2010 when it lost -145,100 FT jobs. FT jobs below:
And speaking of the quality of jobs produced, higher paid sectors like manufacturing and resources showed declines. Peeling back the layers and looking at the quality of jobs is important but we also do need to keep in mind that one month does not make a trend.
As for the market's response after the release, the C$ has weakened off a little bit. It has been on fire since the Bank of Canada raised interest rates on Wednesday morning, all through yesterday and even overnight, however, after this report, it appears to be flat to slightly weaker. The Loonie is probably due for a breather but it is really being driven by two things: 1) the US$ is getting pounded lower against every currency as Fed officials have been talking more dovish (not wanting to raise rates) over the past month and 2) the Canadian economy has been strong and the Bank of Canada clearly wants or wanted to remove some of the stimulus they put in place when oil hit $26/bbl. They have raised interest rates 2X in less than two months and higher interest rates drives buyers of the currency because they get paid more to hold it as rates rise.
Also, we and some of our business colleagues are having a hard time reconciling just why the US$ is so weak given we could be on the precipice of a (nuclear) war. Normally, the US$ would see capital flow to it for safety reasons during times of war but, right now, it appears the market does not really think war is imminent or a reality. The market seems more concerned with the Fed talking more dovish about not hiking rates further.
Expect the Unexpected. The path to least resistance, maybe not today or tomorrow, would be to a stronger US$. We are not hoping for war but certainly are preparing our portfolios for it, especially when the portfolio protection is relatively cheap.