US Nonfarm payrolls and Canada employment change


Today, both the United Stated Nonfarm payrolls and the Canadian employment change reports are released at 15.30 UTC+3.

NFP expectations are the following:


Since the US labor market is already very tight and spare capacity in the economy is quite low, the average wage numbers steal the show. The consensus is for a small decrease compared to last month’s number, YoY figure is expected to fall to 2.8% vs 2.9% last month.

If the wage numbers surprise to the upside, USD should remain bid into the weekend and face no significant downward pressures, unless there is a catastrophic number for the NFP number and/or unemployment figure. Both of which are quite unrealistic, given the accuracy of those forecasts over the last year or so.

The Fed is comfortable with NFP numbers as low as 100K and they have implied that the NFP numbers are going to drop considering the low unemployment figure, which currently sits at 3.8%.

However, the hurricane that hit the eastern US in September could distort the numbers a bit, so watch out for that.

Moving on to the Canada employment release:


The Canada employment change is looking to bounce back from a seemingly devastating reading last month, which put the net employment change at -51.6K. However, breaking down these figures further, the picture was not that bad.

The large drop was mainly caused by the drop in part-time employment figures, which came in at -92K vs -30K expected. This was probably caused due to the large seasonal volatility of the part-time employment figures.

The full-time employment actually came in a little better than expected, 40.4K vs 35K expected. The unemployment rate increased to 6% from the 5.8% month before, expectations were for it to go up to 5.9%.

When trading this release, make sure you focus on the composition of the employment change, not on the overall figure. Should the full-time report beat estimates or stay around 25K, the loonie should not be too affected if anything else in the report surprises to the downside.

The loonie is more likely to be affected by the remaining trade questions and the movement of crude oil prices. Re-packaging NAFTA into USMCA released the tensions slightly, but the trade agreement is considered actually to be worse than the deal it replaced. Furthermore, a full-blown trade war with China is still a possibility.

On a more positive note (at least for Canada) crude oil has continued its march higher and WTI hovers around the 75$ a barrel, which definitely supports the Canadian dollar. Oil prices are expected to go up even further, because US sanctions on Iran crude oil exports are coming into effect on November 4th.

As always, keep your trade sizes smaller than usual during these releases because the liquidity is thin and the chance of negative slippage is higher than usual. Also, I don’t recommend trading the USD/CAD, because there is a major possibility of conflict, should both the reports be better or worse than expected.