Canadian employment for September increased

Posted: Friday, October 5, 2018 - 09:15 EDT

Canadian employment for September increased by 63.3k in the month, surpassing expectations of a 25k increase.  There has been substantial volatility in Canadian jobs data over the past couple of months, with this month’s increases offsetting August’s job losses of 51.6k.  All the jobs gained were part-time employment, increasing by 80.2k, while full-time employment declined by 16.9k.  The unemployment rate declined by 0.1% to 5.9% as a result of the strong job increases while the participation rate increased by 0.1% to 65.4%.  Despite the details in the Canadian employment data being slightly weaker, the headline gains should further support a rate hike at the upcoming October meeting, especially following the renegotiated USMCA agreement. 

U.S. non-farm payrolls increased by 134k in September, which was below consensus of 185k.  Two-month revisions were boosted higher by 87k, which offset the lower than expected job increases in September.  On average, the U.S. economy is still growing at approximately 208k hires per month.  The participation rate held steady at 62.7% with the unemployment rate continuing to track below the 2000 lows, currently at 3.7%.  Wages over the month remained positive with average hourly earnings up 0.3% in the month and 2.8% on a yearly basis.

The tone in the Canadian corporate market was similar to equity markets yesterday – mostly a risk-off tone.  Manulife was in the headlines following a report from an activist investor related to a pending lawsuit on a legacy policy.  The plaintiff claims that they are entitled to deposit an unlimited amount of funds into a cash account earning a higher than market rate of interest, which could lead to losses to Manulife.  As a result, spreads on Manulife bonds are approximately 5bps wider.  Financials remained in the spotlight, primarily related to grandfathered deposit notes.  To end the day, corporate credit spreads were marginally wider by approximately 1bps.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,901.61 -0.82% -0.40% 10.13% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

16,006.67

-0.41%

-0.37%

0.99%

-1.64% 3.68% 4.44% -4.52% 6.77% -0.56%

Rates:

 

Today

% Change

QTD change

YTD change

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Canada 5 Year

2.48%

0.02% 0.14% 0.61% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.58% 0.03% 0.16% 0.54% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.57% 0.03% 0.15% 0.30% 2.15% 2.47% 2.27% 2.23% 2.21% 2.42%
30yr Generic Corporate A rated Spread 1.30% 0.02% 0.00% 0.02% 1.21% 1.24% 1.21% 1.24% 1.28% 1.30%
30yr All-in Corporate A rated Yield

3.87%

0.05% 0.15% 0.32% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.20% 0.02% 0.14% 0.80% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 60.419 -0.101                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.