Notes From the Desk: Today’s Employment Data – Bolstering the Case for Lower Rates 2024-07-05

Notes From the Desk: Today’s Employment Data – Bolstering the Case for Lower Rates


June’s employment data has bolstered the case for lower rates.


By the numbers:




  • June employment 206k (190k expected).  The slightly higher number is offset by the 111k downward revision to the previous two months data.
  • Unemployment rates moved up a notch to 4.1% (4% expected),
  • YoY wage growth meets consensus at 3.9%.




  • Loss of 1.4k jobs (25k expected).  The mix is slightly worse, with 3.4k full-time jobs lost and 1.9k part-time jobs created
  • Unemployment rate 6.4% (6.3% expected)
  • YoY wage growth 5.6% (5.3% expected)


The implications:


  • The high domestic wage growth will raise some eyebrows.  However, we believe this is a lagging indicator, as wage settlements are playing catch-up with inflation.
  • The steady increase in unemployment should cause concerns that Canada is heading towards a harder-than-anticipated landing.  This should keep the Bank of Canada on course to steadily lower rates.
  • Yields are 8-10 bps lower as traders price in two more cuts this year.  A July cut remains a coin toss as there is still a CPI number to digest before the next meeting.


  • The US labour market is becoming more balanced, but the downward trend in job creation will cause some at the Federal Reserve to be worried about overshooting on the downside.
  • We think Chairman Powell will not want to let a soft landing slip through his fingers and will deliver some monetary easing this year.  US yields are 5 -6 bps lower as the bond market moves to price in 25 bps in September and December.
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