Slowing pace of growth: Employment has returned to pre-recession levels but the pace of job creation has slowed compared with late 2009 and earlier this year. Economists expect to see more modest labor data in coming months. The unemployment rate is seen staying stubbornly high as more people enter the market in search of work, a trend reflected in a recent report showing consumer confidence on the rise.
The economy lost jobs in two of the last three months. That is consistent with the Bank of Canada’s view that consumer spending will be more subdued in coming months, after helping fuel the fast-paced early stages of the recovery.
Types of jobs: Beneath the headline numbers, markets are watching for signs of weakness or strength in the underlying details on part-time versus full-time positions, public sector or private sector, and whether jobs are created in high-paying industries or in low-quality ones like retail.
Over the past year, part-time job growth has far surpassed that of full-time work and private-sector employers have lagged governments in hiring.
Wages: Wages are on the rise, according to the latest data for weekly earnings in August. The Bank of Canada closely watches average hourly wages of permanent employees for any sign of inflationary pressures. Upward pressure on wages could make it harder for the central bank to keep its key interest rate on hold in an environment of very low rates and a relatively resilient domestic economy that contrasts with the fragility of the U.S. economy.
Stronger-than-forecast jobs growth would ease concerns of slower growth, and support the Canadian dollar, which will also be sensitive if the U.S. Federal Reserve further eases monetary policy this week as expected.
An unexpectedly large decline in hiring would likely prevent the currency from rising further and support bond prices as the prospect of another rate hike is pushed further into the future.
All of Canada’s primary securities dealers forecast the central bank will stand pat on rates on December 7, according to a Reuters survey on October 19. Two expected the bank to raise rates as soon as January but seven said the key rate would still be at the current 1 percent after March 1.
Markets are pricing in a 95 percent chance of steady rates in December and almost no chance of a rate hike until the second half of next year, according to a Reuters calculation of yields on overnight index swaps.
Reporting by Louise Egan; editing by Peter Galloway