Canada June Employment Data: A Reversal For The Loonie?

Over the last month or so, the USDCAD has reversed an over-year-long trend to the downside. This change was mainly because of a weaker CAD, as a series of disappointing economic data points impacted investor sentiment.

Despite the economic problems from the third wave, which lead Toronto to experience one of the longest lockdowns in the world, it appears that the situation might be improving.

In fact, we could get the first signs of hope from tomorrow’s release of employment data.

We must, however, remain cautious. . This is because analyst projections are so optimistic and out of line with other data, which could disappoint the market.

Where the trends are going
Without domestic production facilities, Canada was relatively slow to start its covid vaccine program. Specifically, they had to wait until their primary trade partner had ramped up production and reached critical mass in its distribution.

Though since then, Canada has been able to catch up and reach a vaccination rate on par with other major countries, including several European ones.

This has allowed experts to reassure the market that lockdowns are a thing of the past for Canada. If we combine that with the seasonal demand for new workers, we could be looking at a bumper crop of new job hiring.

Therefore, can we remain optimistic about tomorrow’s release? Let’s have a closer look at the data we already have.

The good and the bad
Yesterday we got one of the first indicators of green shoots with the Ivey PMI data jumping to the best result since March (before the last covid wave).

This can provide some optimism for the CAD, and for better results in the data. Nevertheless, we have to remember that employment is generally a lagging indicator.

During the last month, most of the data was relatively bleak. This gave employers a reason to postpone hiring for a few weeks to see if the situation improves.

We’ve only seen indications of improvement very recently, so it’s possible that analysts are getting ahead of themselves in projecting better employment numbers.

However, now is also when there is a seasonally large increase in hiring. And given the unusual circumstances, it’s possible that employment could be recovering much faster.

What we are looking for
Economists project Canada’s June Net Change in Employment to show 195K jobs, created last month, compared to -68K prior. That would be the best result after the second covid wave.

Canada does have a reputation for faster rebounds, and with lockdowns lifting by the end of the month, it’s reasonable to expect a substantial amount of the 273K jobs lost during the third wave to return.

Similarly, the unemployment rate is expected to fall to 7.7%, from the previous 8.2%. That would take it back to where it was before the third covid wave.

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