Canada just posted its worst jobs report since the pandemic.
The 83,900 jobs losses were the worst in a month since 2022 and — worse yet, there were 108K full-time jobs lost. That’s led to a slump in the Canadian dollar and boosted USD/CAD by 90 pips to 1.3728. That’s the highest for the pair since March 7.
The report led to the unemployment rate rising to 6.7% from 6.5% but that metric is worth some perspective as it had been above 7% in the middle of last year.
Looking at the chart, it’s not clear if this is the start of a renewed rise or a blip.
It’s the same on the headline number as Canadian jobs reports tend to be very volatile and that’s particularly true lately as estimates of the country’s population have bounced around due to a boom-and-bust in immigration.
A better look at jobs often comes via the three-month moving average, as it smooths out some of the volatility. It had been running at +50K into November but the past three months have all been soft, and at -32.8K, the average is now at the lowest since 2021.
Worse yet, if you exclude the pandemic, you need to go all the way back to the financial crisis to get a worse three-month period.
That’s not encouraging and the news for the Canadian dollar would be worse if not for surging oil prices. That’s going to offer a material lift to Canadian terms of trade in March and perhaps going forward. But if the oil surge reverses, beware of a break above 1.3750 for USD/CAD and even a test of the highs of the year near 1.3925.
On net though, I think the news is better than it looks. Canada’s economy is adjusting to falling population and a drop in housing prices. There is also the uncertainty around USMCA. I expect all of that to look brighter in the second half of the year.
Oil is elevated and will eventually come down but another energy crisis underscores Canada’s enviable position in energy markets and that should lead to some inbound investment.
Looking ahead, eyes will stay on the Iran war and oil prices but will also turn to next week’s Canadian inflation report. Despite today’s jobs miss, the market still sees the Bank of Canada remaining on the sidelines. Pricing shows only a fractional chance of a rate cut in March/April before pricing in 41 bps of hikes by year end.
Here’s RBC today:
we do not expect the BoC to make changes to the policy rate at Wednesday’s meeting. Our base case forecast also assumes the policy rate remains unchanged for the remainder of 2026 as inflation continues to trend lower toward target.
The Canadian CPI report is coming up on Monday, followed by the Bank of Canada on Wednesday.
This article was written by Adam Button at investinglive.com.