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Jun 07 - 10:55 AM

CIBC: Reactions to Canada and US Jobs Reports: Implications for BoC and Fed

By eFXdata  —  Jun 07 - 09:00 AM

Synopsis:

CIBC analyzes the recent employment data from Canada and the US for May, highlighting mixed signals in both labor markets. While Canada saw modest job growth and a rise in part-time employment, the US reported a significant increase in payrolls but also a rise in the unemployment rate.

Key Points:

  1. Canadian Employment Data:

    • Canada added 27K jobs in May, aligning with expectations, but the unemployment rate ticked up to 6.2%.
    • Job gains were predominantly in part-time positions (+62K), with a decline in full-time employment (-36K).
    • The involuntary part-time rate increased to 18.2% from 15.4% a year ago, indicating economic weakness.
    • Wages for permanent employees accelerated to 5.2% y/y from 4.8%, but this series remains volatile and below recent peaks.
    • Total hours worked were unchanged, suggesting GDP growth eased after an April bounce.
  2. US Employment Data:

    • The US added 272K jobs in May, significantly surpassing the consensus expectation of 180K and the previous month’s gain of 165K.
    • Net revisions for the prior two months were -15K.
    • The unemployment rate rose to 4.0%, higher than the expected 3.9%, and the participation rate dipped to 62.5%.
    • Wage growth accelerated to 0.4% m/m, above the consensus expectation of 0.3%.
    • Mixed signals were observed, with payroll data indicating a heating labor market and the household survey suggesting cooling.
  3. Implications for Monetary Policy:

    • The mixed labor market signals suggest the Fed will likely wait for additional data to better understand the state of the labor market.
    • The Fed is expected to place more emphasis on inflation data to assess the overall balance of supply and demand in the economy.

Conclusion:

The May employment reports from Canada and the US presented a complex picture with mixed signals. In Canada, part-time job gains and a rise in the unemployment rate indicate economic challenges, while in the US, strong payroll growth contrasts with a higher unemployment rate and a lower participation rate. The Federal Reserve is likely to adopt a wait-and-see approach, focusing on upcoming data to make informed decisions about future monetary policy actions.

Source:
CIBC Research/Market Commentary

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