US and Canadian employment data in the limelight today – BBH

The employment reports for the US and Canada are the last points of interest ahead of the weekend, according to analysts at BBH. 

Key Quotes

“Canada jobs growth has been impressive.  It has averaged 41.6k jobs a month over the last three-months, compared with the average for 2016 of 19k and the 2017 average through November of 31k.  A subdued report is expected.  The Bloomberg survey median of 2k would be the smallest increase since November 2016.  Separately, Canada will also report it merchandise trade balance (November) at the same time as the employment report.  The Ivey PMI is reported ninety minutes later.”  

“The US has created more than 200k jobs in three of the past four months through November.  Part of the rise in October and November were related to the storm-induced problems in September, when the world's largest economy created 38k net new jobs.  The three-month average of 170k matches the year-to-date average of 174k.  Economists are still looking for 180k-200k.  There are few inputs for the report and none point to any deterioration.”  

“The market will focus on earnings, though a tick lower in the unemployment rate to 4.0% would surprise.  Due to the base effect, average hourly earnings must rise by at least 0.3%, otherwise the year-over-year rate will slip from November's 2.5% pace.  Any disappointment will likely quickly be transmitted to the dollar through the interest rate market, but will unlikely deter expectations for a March Fed hike.  It appears that a little more than an 80% chance has been discounted after the FOMC minutes compared with about 69% at the end of 2017.”  

“The US will also report the November trade balance, the ISM non-manufacturing survey, and factory and durable goods orders.  The key assessment of the US economy is unlikely to change.  The pace of growth has increased in recent quarters and still appears running near a 3% quarterly annualized pace.  Regardless of how one sees the medium and longer-term consequences of the tax changes, most seem to agree it will help boost growth in the near-term (as in this year).”

“The US trade deficit is deteriorating more than it may appear as the dramatic improvement in the energy balance is concealing the worsening of the non-oil trade balance.  It is something that we suspect will be increasingly in the news this month as several trade issues come to a head and NAFTA and US-South Korea talks resume.”