Canadian labour markets will be the focus with the scheduled release of Canadian international trade data delayed by the U.S. government shutdown, while the release of U.S. employment and trade data was also pushed further back into December.
The November employment report on Friday will be the last major data release ahead of the Bank of Canada’s interest rate decision on Dec.10.
We expect employment growth to be in flat in November, following larger-than-expected 67,000 and 60,000 increases in October and September, respectively. Slower population growth is expected to limit the number of new entrants into labour markets, leaving the unemployment rate unchanged at 6.9% from October after 7.1% in September and August.
Canadian labour markets are still soft with the unemployment rate still roughly one percentage point above levels we expect would be consistent with a “normal” backdrop. However, a steady 6.9% in November would mark the first month since May 2023 that there wasn’t a rise on a year-over-year basis.
Employment in heavily trade exposed sectors like manufacturing and transportation and warehousing have still underperformed broader trends, but showed significant improvement in October. Underperformance in trade exposed sectors have yet to spread broadly across the economy. Layoffs have been limited with the rise in the unemployment rate in October mostly reflecting longer job search times for new entrants. Canada’s employment count overall was up 299,000 in October from a year ago.
Industry data like job openings from indeed.com continued to show signs of stabilization in hiring demand. And, business confidence measures have improved as some of the more damaging international trade scenarios from earlier this year have not materialized.
Additionally, we’ll be watching hours worked closely. A decline in October (despite a gain in employment) was reportedly largely due to a teacher’s strike in Alberta, and should reverse in November. Wage growth unexpectedly ticked higher in October, but we expect it will broadly continue to edge lower in the near term with business surveys still suggesting planned wage increases to be smaller.
In October’s interest rate cut, the BoC clearly signalled that interest rates had now been adjusted to about where they should be (lower end of the estimated “neutral range” where they’re not significantly adding to inflation pressures), making additional reductions unlikely without significant downside surprises in growth, and/or inflation.
Week ahead data watch:
- We’ll get delayed U.S. personal spending data for September next Friday. We expect spending to increase 0.2% month-over-month. Retail sales for September came in below consensus, but the services component appeared strong, offsetting weakness in goods spending.
- We anticipate personal income will rise 0.4% month-over-month, matching August.
