April 10, 2015
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The Canadian economy added 28,700 jobs in March compared to a loss of 1000 positions in February. Most of the new jobs created in March were part-time and it was the other way around in February when full time positions accounted for the bulk of hiring. The unemployment rate stayed at 6.8%, the same level as February. Economists had expected no job creation after the recent layoff announcements in retail and oil industries. Avery Shenfeld, chief economist at CIBC World Markets said, ” Employment was a lot brighter than expected for an economy entering a rough patch for growth”. The public sector and private sector added 26,500 and 19,300 positions respectively while self-employment fell by 17,000 in March. Provincially, Saskatchewan had the lowest unemployment rate at 4.4% and Newfoundland had the highest unemployment at 13.3%. If the Canadian economy continues to show strength despite a dramatic decline in oil prices, then we expect there won’t be any rate cuts by Bank of Canada (BOC) in the near future. In January the BOC cut its key rate to 0.75% from 1% and the BOC governor, Stephen Poloz, referred to the rate cut as the “insurance” against the impact of decline in oil prices to Canadian economy.
Meanwhile the US economy added 126,000 jobs in March compared with 264,000 in February. Economists were expecting a gain of 250,000 jobs. The unemployment rate remained steady at 5.5%. It remains the lowest rate since May 2008. It was first time in the last 14 months that this number fell below 200,000 mark. The labor force participation rate ticked lower to 62.7% from 62.8%. Although it’s not positive news for the US economy, equity markets rallied after the news on the cue that the Federal Reserve won’t raise the interest rates soon based on weak unemployment figures. It is too soon to conclude that this is a sign that the US labor market is being affected by the broader economic slowdown. The slowdown could be because of a harsh winter and an appreciating dollar, but this jobs report will certainly lower the positive sentiment regarding rise of interest rates soon (may be by June).
Unemployment is a lagging indicator on the economy and capital markets. As such we would not expect that the employment numbers would indicate what we may expect. The actual employment numbers versus the expectations however does show the optimism among economists about the US economy. While we think that the US economy is still very strong the rise in the US dollar may however slow down exports of US produced goods. Many US companies however has significant non-US production facilities or subsidiaries in the the far East and other countries where they operate hence there is limited impact in their actual sales however more so in reported earnings when reported back to U$ would show lower revenues in foreign subsidiaries.
Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch