Canada: Labour market to disappoint in May - TDS

Analysts at TD Securities are looking for the Canadian labour market to disappoint in May with employment falling by 5k which should push the unemployment rate to 5.8%, while wages should soften to 2.5% y/y on a sizeable base-effect from May 2018.

Key Quotes

“While we acknowledge that the volatility of the LFS makes it difficult to accurately predict the timing of any pullback, we view the risks as disproportionately skewed towards a soft print and think our forecast could prove conservative should such a pullback occur.”

“Previous examples have shown much larger giveback after periods of strength; for example, net employment fell by over 60k in January 2018 after job growth was reported at 140k over 2017Q4. Any giveback should be led by the goodsproducing sector, with manufacturing in the spotlight after adding 10k jobs over March/April as PMIs dipped into contractionary territory. However, segments of the service-producing sector also appear vulnerable with wholesale/retail trade employment rising by 4.8% (annualized) over the last six months.”