CIBC provides a detailed analysis on the employment scenarios in the US and Canada for July, drawing attention to the variances from expectations and the potential implications for central bank policies in both countries.
US Employment Landscape:
- Under Expectations: The July payroll report showed that job gains were slightly below consensus. 187K new jobs were added, as compared to the expected 200K.
- Revised Figures: Prior two-month job numbers were adjusted downwards by 49K, adding to the negative surprise.
- Mixed Results: The unemployment rate decreased slightly to 3.5%, and nominal wages observed a growth of 0.4% for two months consecutively.
- Federal Reserve's Perspective: While the softening in the labor market is what the Fed is seeking, the central bank will be awaiting a more comprehensive set of data and, especially, a further decline in prices before making any decisive moves for September.
Canadian Employment Landscape:
- Contrary to Expectations: Contrary to the anticipated 25K increase in jobs, there was a decline of 6K in employment. The construction sector noted the most significant drop.
- Unemployment Rate: Owing to a decrease in labor force participation and the decline in jobs, the unemployment rate rose to 5.5%, aligning with consensus expectations.
- Surging Wages: In contrast to the softer job numbers, there was an unexpected surge in wage growth, reaching 5.0%. This was significantly higher than the 4.1% that was anticipated.
- Bank of Canada's Stance: The data might not be sufficient for the Bank of Canada to believe that the labor market has become loose enough to maintain its 2% CPI target sustainably, regardless of the weaker headline job count.
CIBC's review of the July employment reports for both the US and Canada highlights the complexities inherent in interpreting labor market data. While the US saw job growth slightly under expectations, Canada experienced an unexpected decline. Still, wage growth in Canada has shown a surprising uptick. These mixed signals will undoubtedly play a crucial role in shaping the monetary policy decisions of the respective central banks.