5. August 2011 12:02
Yields are a few bps above yesterday’s closing levels thanks to a better than expected US NonFarm Payrolls print for July. Total new jobs of +117k beat the +85k expected, and last month’s poor +18k was revised upwards to +46k.
The “beat” extended to all measures, including:
Private Payrolls: +154k vs. +113k exp. (June revised from +57k to +80k)
Manufacturing Payrolls: +24k vs. +10k exp. (June revised from +6k to +11k)
The Unemployment Rate dropped to 9.1% from 9.2%, average hourly earnings grew by more than expected, and average weekly hours worked held steady.
The Canadian Employment Report for July – released at 7am today – is probably already in the rear-view mirror in terms of influence on markets but a summary includes:
- Weaker than expected +7,100 jobs created (exp. +15,000)
- Full-time +25,500 / Part-time -18,400
- Unemployment Rate declined from 7.4% to 7.2%, primarily as the result of a decrease in the labour force Participation Rate
The Canadian Employment Report shouldn’t be viewed very positively or very negatively, as the “miss” on the headline number should be considered alongside the strong full-time jobs growth, which is always favourable.
In markets as volatile as these, conditions can change abruptly and without warning, as we saw yesterday. Market participants, already growing wary of risk for the past several weeks, can quickly adopt a herd-mentality. Commentators point to the causes of yesterday’s rally in the bond market (and selloff in equities) as a combination of Japanese / Swiss currency intervention, necessity-driven bond-buying by the ECB, comments that EFSF should be expanded, concerns about political wrangling in Washington and the overall health of the US economy among others. None of these are new / surprising but all played their part in causing markets to move aggressively.
Expect more volatility in the near term.
8. July 2011 05:05
The bond market has rallied very sharply this morning due to a very bad US jobs report for June. The economy added 18,000 jobs overall (exp. 105,000), Private Payrolls were up 57,000 (exp. 132,000), and the Unemployment Rate crept up to 9.2% from 9.1%. Adding to the disappointment, the May new jobs numbers were cut in half. Markets certainly knew the US labour market was relatively weak but it seems that everyone has been caught off guard as to how weak.
On the flipside, Canada created 28,400 jobs in June (more than the US despite being roughly one-tenth the size), and in doing so beat expectations for 15,000 new jobs. Those interested in finding something to gripe about will point to a skew in favour of part-time jobs (21,100 PT / 7,300 FT) but this is a pretty good report overall. The unemployment rate held steady at 7.4%.
The US report has overshadowed the positives of the Canadian report, which is why rates are so much lower this morning.
6. May 2011 03:57
Rates had risen several basis points this morning thanks to stronger than expected April jobs reports on either side of the border but have given much of that back.
In Canada, 58,000 jobs were added [exp. 20k], representing a step in the right direction following a very disappointing March print. That most of the additions were of the part-time variety does not seem to be a great concern. Additionally, these new jobs helped bring the reported unemployment rate down to 7.6% from 7.7%.
The US also added jobs in April: 244k [exp. 185k]. Given the recent run of disappointing jobs data, markets will be somewhat relieved with this strong headline number. Despite the positive jobs growth, the unemployment rate actually increased from 8.8% to 9.0%. Confusingly, the reported jobs number is based on a survey a companies, while the unemployment rate is based on a survey of households. So while the survey of companies (the “Establishment Survey”) reported 244k new jobs for April, the reported loss of 190k jobs in the Household Survey was responsible for driving the unemployment rate higher.
Strong employment reports tend to cause selloffs in the bond market as robust economies lead rates higher. Outside of today’s positive reports, most recent data had been disappointing, and it appears that the bond market hasn’t been able to shake that caution altogether.
8. April 2011 04:57
Rates have gone a touch higher this morning as markets everywhere reflect continued optimism and support for the ongoing global growth story.
This morning was a big one for data in Canada as the March employment numbers were released. The headline Net Change in Employment was weak, but this was misleading: Canada added 90,600 full time jobs during the month, and lost 92,100 part time jobs so the jobs machine is a lot stronger than the net decline suggests. Our bond market would have rallied sharply if the true picture was as weak as the headline.
The Unemployment Rate declined to 7.7% from 7.8% as the Labour Force Participation Rate declined, and annualized housing starts of 189k were higher than the 181k expected.
A story that has received relatively little attention from the press is the budget stalemate down south. At midnight tonight many branches of the US government may shut down as the latest federal budget has not been approved by the Republicans, pending certain concessions. This won’t have a large economic impact (unless it becomes really drawn out), but serves as a reminder of how ill-equipped the US political system is to deal with that nation’s biggest challenges in over half a century.
1. April 2011 04:11
The bond market has sold off this morning strongly following better than projected jobs numbers in the US. Nonfarm payrolls for March grew by 216k (190k) expected, with Private Payrolls having grown by 230k (206k expected).
The Unemployment Rate, while still high, crept down to 8.8% from 8.9%. Encouragingly, this decline was due to the creation of jobs, and not due to a contraction of the labour force as had been the case in previous months.
One downside to this report was that growth in hourly employee earnings failed to meet expectations.
4. March 2011 04:52
The bond market is roughly in line with yesterday’s closing levels, following a decent employment report out of the US this morning. Nonfarm Payroll growth of 192k was largely in line with expectations, while growth in the Private Payrolls and Manufacturing Payrolls components were slightly better than expected. Also, there were some upward revisions to the weak January report. One gets the sense, however, that given strong ADP numbers on Wednesday, encouraging weekly and continuing claims yesterday, and an artificially weak January jobs report, the market is disappointed that this morning’s report wasn’t materially better than published forecasts.
The real weakness in the report was that the US Unemployment Rate fell to 8.9% from 9.0% last month, but had actually been expected to rise to 9.1% as formerly discouraged workers were expected to start wading back into the job market. Evidently, job prospects are less appealing on the ground than commonly believed, because these workers don’t seem to be reinitiating their job searches. This weakness in underscored by a lack of earnings growth for employees, and flat weekly hours also included in this morning’s report.
There is some additional data coming out at 10am (US Factory Orders, Canadian Ivey PMI) .
7. January 2011 10:05
The bond market is roughly flat this in Canada following strong December employment numbers which have been tempered by a very disappointing jobs report in the US. The economy added 22,000 jobs (mainly private sector, broadly-based) and the real number is probably higher as there was a reduction of 38,000 ‘self-employed’ workers. Often individuals who cannot find suitable jobs work for themselves as self-employed consultants and the like. A sharp drop in this category may signal that some of these individuals are finding suitable work elsewhere. The expectation was for +20,000 new jobs.
Despite the new jobs, the Unemployment Rate remained at 7.6%.
In the US, Treasurys are actually rallying a bit this morning as the NonFarm Payrolls data for December disappointed massively. Following the huge upside surprise for the ADP numbers on Wednesday, the official economy-wide number of new jobs is actually a disappointing 103k (expectation was for +150k). On the ‘bright’ side, the Unemployment Rate declined from 9.8% to 9.4%. I use the term ‘bright’ because the decline in the Unemployment Rate is being driven mainly by a reduction in the number of unemployed actively seeking work. If you are not actively seeking work, you cannot be counted as unemployed, which means you can’t be accounted for in the URate. This is known as the discouraged worker effect.
Key Data for next week includes:
Canada: Building Permits (Mon); Housing Starts (Tue); Trade Balance (Thu)
USA: Wholesale Trade (Tue); PPI, Initial and Continuing Jobless Claims (Thu); CPI, Capacity Utilization & Industrial Production, Consumer Sentiment, Business Inventories (Fri).
3. December 2010 05:03
There has been a massive bond market rally this morning due to a really big ‘miss’ in the US Nonfarm Payrolls number for November. The creation of 39k jobs fell well short of revised market consensus of +150k, and failed to validate a growing market view that the jobs picture was rapidly on the mend. Additionally, the Unemployment Rate rose to 9.8% from 9.6%.
While the market appears to have been blindsided by these poor numbers, those at the Federal Reserve who had pushed for additional stimulus via QE2 will feel vindicated.
The picture doesn’t look any prettier up north. For November, Canada managed to add 15.2k jobs (short of the expected +19.8k), however full time employment declined by 11.5k, meaning that we added 26.7k part-time jobs during the month. Many of these ‘part-time’ jobs would be related to the holiday season and therefore should be considered to be ‘temporary’. Moreover, a declining Labour Force Participation Rate (to 66.9% from 67.2%) has pushed the Unemployment Rate down to 7.6% from 7.9%. Of all the ways to achieve a declining Unemployment Rate, this is the least desirable because it means a segment of the population have stopped looking for work and therefore cannot be counted as unemployed.
Next week’s Canadian data includes: Building Permits (Mon), Bank of Canada Rate decision (Tue), Housing Starts (Wed), Merchandise Trade Balance (Fri)
US data includes: Consumer Credit (Tue), Initial and Continuing Jobless Claims (Thu), Trade Balance, Consumer Sentiment, and a Treasury Statement (Fri).
8. October 2010 08:48
This morning’s big news are poor employment headlines on either side of the border contributing to more rallying in the bond market.
Although the Canadian economy shed 6,600 jobs in September (+10,000 gain expected), the details are not so bad. 43,700 lost part time jobs were replaced by 37,100 full time jobs, which I think on balance should be viewed as a good thing. In other employment related news, our Unemployment Rate fell to 8.0% from 8.1%.
Other Canadian news includes a positive development in Housing Starts: September Housing starts of 186.4k were higher than the 179.0k that were expected, and the August number was also revised higher by 6,000 units.
Further south, 18,000 jobs were lost in the month of September (excluding the impact of the unwinding of census-related jobs). Beneath the headline, Private Payrolls were up by 64,000 (falling short of expected 75,000 gain) but it should be noted that the Private Payrolls gain for August was revised higher by 26k.
Other tidbits include an Unemployment Rate which fell to 9.6% from 9.7%, as well as flat levels of Hourly Earnings and Hours Worked.
Due to the Thanksgiving Day holiday here and the Columbus Day holiday in the US, both markets will have an early close.
10. September 2010 10:23
The big story of the day for Canada was the August Employment Report, which showed the economy produced 35,800 “new” jobs, beating the expected level of 30,000. I use “new” because most of the gains were a reversal of job losses in the education industry that were registered in July. Notwithstanding some of this noise, the Canadian labour market has improved markedly in the past year and a half, with the total number of jobs essentially back to peak levels of mid-2008.
Of course, the labour force has grown in that time, causing the unemployment rate to remain elevated. In August, the unemployment rate actually increased to 8.1% from 8.0% on the back of a higher participation rate.
Looking ahead to the first half of next week:
Canada: Labour Productivity, Capacity Utilization Rate (Q2, Tuesday), Manufacturing Sales (July, Wednesday).
US: Small Business Optimism, Retail Sales, Inventories (Tuesday), Import Price Index, Empire Manufacturing, Industrial Production, Capacity Utilization (Wednesday)