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    Canada: Setting up for employment report (June) - TDS

    Research Team at TDS, suggests that in Canada, several individual industries are poised to reverse recent declines and are forecasted to drive the creation of a respectable 20k jobs in June.Key Quotes“Of note, the trade sector lost 41k jobs in May (almost a 3 standard deviation decline) while healthcare shed 25k positions (a 2 standard deviation decline). Based on historical rebounds these two sectors alone could add around 50k jobs in June. Expectations for a further increase in hiring is also supported by the split in full/part-time hiring which points to sustained hiring in full-time while the May drop in part-time hiring is set to be reversed. Note that the temporary hiring attributed to the 2016 Census is set to run through to the middle of July, which reduces the likelihood of a retrenchment in public sector hiring.Even with the forecasted increase in employment, the unemployment rate is likely to nudge higher to 7.0% given an anticipated rebound in the labour force and a low May hurdle of 6.94% when measured to two decimal places. If the forecast for 20k in June is realized the 6-month pace of employment will remain broadly unchanged at 10k jobs, which is a touch stronger than what is implied by the wider macro backdrop.Foreign Exchange We suspect that NFP will like dictate the price action, so market unlikely to focus on local data. For now, USD/CAD is focused on risk appetite given the rising banking stress in European and mixed signals about the state of the global economy. Recall, Canada’s historically large current account deficit has been financed by portfolio flows, leaving CAD vulnerable to shifts in market sentiment. Indeed, the pickup in equity flows reflect the marginal rallies in oil earlier this year but are unlikely to accelerate if risk appetite falters or oil prices continue to range trade. In turn, this week’s NFP will set tone for risk appetite since a strong number indicates the May report was a fluke while a weak print could ring some alarm bells. Best case for CAD is a print in line with consensus that shows growth is humming along around 2% but not strong enough to get the Fed too excited about hiking rates in Q3."


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