Morning Commentary: Jobs, Jobs, Jobs

Foreign Exchange - Morning Commentary
Jobs, Jobs, Jobs
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Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
The dual jobs report in the US and Canada are the highlights of the day.  In the US, the headline number of 1.37 million jobs beat expectations but realized the expected slowdown in job creation from last month’s revised 1.73 million print.  Looking at the breakdown, government jobs gained the most due to Census 2020 hiring while retail added 250K jobs but still remains 655K jobs below February levels.  One specifically troubling figure in the report is the number of permanent job losers that rose by more than 500K to 3.41 million.

While the jobs number came in roughly around market consensus, the real headline is the unemployment rate that came in much better than expected at 8.4% versus market expectations for a 9.8% print.  This is the first single digit unemployment number since March when the unemployment rate was around 4.0%.   

In Canada, the jobs number came in near expectations at 245.8K versus market consensus for 250.0K.  Notably, 205.8K of these jobs were full-time positions that reversed the skew towards part-time jobs seen in previous job reports.  Canada’s unemployment rate also improved to 10.2% from 10.9%.

Overall, both of these jobs reports were positive and remain consistent with a continued recovery.  Ironically, the robust jobs reports represent downside risks in and of itself.  The more robust the economic numbers are, the higher the bar for further stimulus—both fiscal and monetary—becomes.  The background of massive accommodation has provided a foundation for which the economy can push off.  Should further stimulus be delayed, or not forthcoming, the economy will be forced to stand unassisted during a period where the virus outlook remains uncertain.
  • Republicans and Democrats remain far apart on stimulus talks.  Renewed contact between the two sides has produced some progress as House Speaker Pelosi agreed to work with Mnuchin to avoid a government shutdown weeks before the election.  At a minimum, this should remove the risk of either side using a government shutdown as a leverage point in the wider stimulus discussion.  
  • Chief Cabinet Secretary Suga continues to build support for his candidacy to succeed PM Abe in the LDP leadership election as Suga nearly has a majority of publically declared support. 
  • Australia’s retail sales number came in below expectations at 3.2% versus consensus for a 3.3% print.  This improvement was primarily driven by increases in discretionary items.  The impact of increased restrictions in Victoria should appear in next month’s report.
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