The first Friday of the month means the release of North American employment data and the news was good both sides of the 49th parallel.
By Peter Martin
Saturday, February 7, 2015
49th parallel. US non-farm payrolls increased 257,000 in January, exceeding the consensus estimate of 230,000, while the Canadian labor force survey showed a 35,400 jump in employment, which was several times larger than expected. It was in the revisions to previous months’ data that the big differences occurred though. US payrolls for December were revised up to 329,000 from the previously-reported 252,000, while the 4,300 drop originally announced for December’s Canadian employment was amended to a much steeper decline of 11,300. Despite the upbeat nature of January’s employment figures, the changes to the December data keeps the complexion of the Canadian labor market looking a little anaemic and it’s not easy to see the Bank of Canada shifting its recent dovish stance on this evidence, especially when considered in conjunction with the after effects for the Canadian economy that we might expect from the depressed price of crude oil, Canada’s most important export. The Fed on the other hand is presented with a bullish jobs market that is showing a very healthy rate of job creation alongside a higher labor force participation rate, and this will provide some counterweight to soft inflation data in the discussions of whether a rate hike is warranted. The US unemployment rate inched up to 5.7% last month from 5.6% in December as a result of more workers actively seeking jobs, an indication that improvements in the economy are encouraging disgruntled workers to return to the labor force: participation was a up a touch at 62.9% in January compared to 62.7% in December. The average working week held steady at 43.6 hours, but average hourly earnings increased a better-than-expected 0.5%. The deviation in expectations for the future paths of monetary policy by the Fed and the Bank of Canada has led to the US dollar strengthening against the Loonie. USD/CAD rose 0.82% to 1.2537 by early afternoon in New York. The sheer potency of the US employment data has pushed the dollar up substantially against most other currencies as well: the euro sank 1.4% against the dollar, while USD/JPY rallied 1.4%. The Bank of Canada next meets on March 4, followed a couple of weeks later by an FOMC meeting that begins on March 17.
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