Synopsis:

CIBC reacts to the November US and Canadian jobs reports, interpreting the mixed signals as supportive of rate cuts at upcoming central bank meetings. For the Fed, stronger payrolls and wage growth do not offset the overall cooling labor market trends. For the BoC, rising unemployment and weaker earnings reinforce the need for further easing.

Key Points:

• US Jobs Report:

  • Headline Growth: Nonfarm payrolls rose 227K, largely recovering from earlier disruptions (weather and strikes). Revisions added 56K to prior months.
  • Sector Details: Gains tilted towards non-cyclical sectors like healthcare and government, while manufacturing saw a boost from strike resolutions.
  • Unemployment Rate: Increased to 4.2%, reflecting household survey employment declines.
  • Wages: Average hourly earnings rose 0.4% m/m (4.0% y/y), slightly above expectations.
  • Implication for the Fed: The data aligns with a 25bp rate cut in December as payroll momentum softens despite isolated wage pressures.

• Canada Jobs Report:

  • Employment Gains: Employment grew by 50K, double the consensus, driven by construction, education, and wholesale/retail sectors.
  • Participation & Unemployment: Labor force participation rebounded, pushing the unemployment rate to 6.8% (vs. 6.6% expected).
  • Details: Full-time jobs drove growth, but public sector gains dominated, and private sector hiring was weak (+6K).
  • Wages & Hours: Hourly earnings for permanent employees slowed to 3.9% y/y (from 4.9%), and hours worked declined.
  • Implication for the BoC: Persistent labor market slack and easing wage pressures justify a 50bp rate cut next week to support the struggling economy.

Conclusion:

CIBC views the November jobs data as validating expectations for monetary easing. The Fed remains on track for a 25bp cut, with no major surprises in labor market trends. The BoC is likely to deliver a 50bp rate cut, as rising unemployment and slowing earnings signal further economic weakness. Both central banks appear poised to act decisively to address these challenges.