The labour (or labor) market on both sides of the border had something to say this morning, and neither said what the market expected. South of the border, payrolls more than doubled the consensus, giving the Treasury market something to worry about. Canada’s headline numbers looked good until you read the footnotes.
The numbers – Canada.
- 88k jobs created (10k expected).
- Unemployment rate: 6.6% (6.9% prior; 6.9% expected).
- Full-time jobs: +154k; part-time: ?66k..
- Wage growth down from 4.8% to 3.2% y/y.
- Six-month average employment change is still slightly negative (?2k).
- Much of the job creation is concentrated among youth, a reminder that the quality of the gains skews toward lower-wage employment.
The numbers – US.
- 172k jobs created (80–85k expected).
- Unemployment rate: 4.3% (as expected)
- Participation rate: 61.8% (unchanged).
- Wages: 3.4% y/y (in line with expectations).
- Prior two months were revised higher by a combined +93k.
The implications.
- The Canadian rebound is real but narrow. Six-month average employment is still slightly negative, and the quality of May’s gains, concentrated in lower-wage, younger workers, does little to ease concerns about the underlying health of the labour market.
- With GDP growth tracking flat through 2026, we don’t think the BoC has any reason to move, but the bond market has priced in ~1.5 hikes by the end of the year.
- The US data is a different animal. The Fed’s patience looks increasingly well-founded, and the bond market has gone further, pricing in a hike before year-end and placing meaningful odds on a second move in early 2027.
- New Chair Warsh inherits a resilient economy and a labour market that has no interest in slowing down.
- Yields are 7-10 bps higher on both sides of the border.
