Canadian employment numbers for October increased

Posted: Friday, November 2, 2018 - 09:48 EDT

Canadian employment numbers for October increased by 11.2k, which fell short of expectations for +15k.  The unemployment rate though declined from 5.9% to 5.8%.  All jobs added this month were full time of +33.9k, which was positive, and offset by declines in part-time employments of -22.6k.  Average earnings were weaker from 2.2% in September to 1.9%, while the participation rate ticked lower by 0.2% to 65.2%.  Job growth in Canada this month was weaker although this follows an extremely strong previous month of +63k part-time jobs added. 

U.S. non-farm payrolls added 250k jobs which beat expectations of +200k.  Two-month revisions were flat with the unemployment rate unchanged at 3.7% as a result of the labour force participation rate moving 0.2% higher to 62.9%.  As employment remains robust in the U.S. jobseekers are returning to the job market in hopes of finding employment.  Wage growth increased by 0.2% in the month, and on a year over year basis increased from 2.8% to 3.1%.  Based upon the October jobs data, this should give confidence for the Fed to continue its rate-hike cycle, while the Bank of Canada could look to pause in December unless stronger economic data emerges.

The positive tone remained for a second day in a row, leading to sustained momentum in equity markets.  With the U.S. and China reinitiating trade talks, this news of constructive and positive discussions are further propelling risk assets.  Asian equity markets along with European equity markets have opened higher this morning after President Trump indicated that he wishes to reach a deal with China.  Unfortunately, the positive momentum did not fully flow through to the Canadian corporate credit market, as new issue supply kept spreads from tightening.  PSP capital issued $1.25bil 7-year bonds at +57bps over the curve, while GM Financial announced an ABS deal for approximately $327mil across five tranches with expected pricing early next week.  The new issuance led to flows skewed towards selling, and as a result spreads ended the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,740.37 1.06% -5.85% 4.10% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,150.15

0.82%

-5.51%

-4.22%

-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

2.42%

-0.01% 0.08% 0.56% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.50% 0.01% 0.08% 0.46% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.55% 0.01% 0.12% 0.28% 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

3.85%

0.03% 0.12% 0.30% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.16% 0.03% 0.10% 0.76% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 65.738 -1.177                

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.