Canadian employment in January increased by a resilient 66.8k

Posted: Friday, February 8, 2019 - 09:18 EST

Canadian employment in January increased by a resilient 66.8k, exceeding expectations for 5k new jobs.  The previous month was revised lower by 1.5k.  The split between full-time and part-time employment change was relatively even, with full-time adding 30.9k jobs and part-time increasing by 36k.  The participation rate ticked higher by 0.2% to 65.6% and as a result the unemployment rate increased by the same margin to 5.8%.  Although hourly wage growth remains low, it did move higher in January to 1.8%, compared with 1.5% for the previous month.  Most of the new jobs added were in the service industry with retail, professional and public administration providing the largest increase.  The strong employment data is leading to the Canadian dollar strengthening by half a cent compared to the U.S. dollar this morning. 

Equity markets were weaker yesterday, especially after news that President Trump would no longer meet with President Xi.  U.S. trade representatives along with Treasury Secretary Mnuchin are still expected to meet in China next week following the Chinese New Year holidays.  However, March 2nd remains the deadline for both countries to reach a trade agreement, otherwise the U.S. has threatened that it will raise tariffs on $200bil of Chinese imported goods.

The U.S. and China trade news along with lower growth expectations in Europe led to weakness in the Canadian corporate credit market.  However, RioCan announced yesterday that it has received unsecured bank funding, which follows news earlier in the morning that SmartCentres REIT had also secured a bank loan to redeem an upcoming bond maturity.  The slower new supply calendar to start the year has led to a continued demand for credit, and the pace of REIT issuance should be revised lower this year.  Canadian corporate credit spreads were wider by approximately 2-3bps yesterday with the weaker tone this morning leading to continued pressure on spreads.

Equity Markets:

  Index Level % Change QTD YTD Q3 2017 Q4 2017 Q1 2018 Q2 2019 Q3 2019 Q4 2019
S&P 500 2,706.05 -0.94% 8.14% 8.14% 4.48% 6.64%

-0.76%

3.43% 7.71% -13.52%
TSX

15,703.36

-0.06%

9.88%

9.88%

3.68% 4.44%

-4.52%

6.77% -0.56% -10.11%

Rates:

 

Today

% Change

QTD change

YTD change

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Canada 5 Year

1.81%

-0.03% -0.08% -0.08% 1.75% 1.87% 1.97% 2.07% 2.34% 1.89%
Canada 10 Year 1.90% -0.03% -0.07% -0.07% 2.10% 2.05% 2.09% 2.17% 2.43% 1.97%
Canada 30 Year 2.16% -0.02% -0.03% -0.03% 2.47% 2.27% 2.23% 2.21% 2.42% 2.18%
30yr Generic Corporate A rated Spread 1.50% 0.00% 0.00% 0.00% 1.24% 1.21% 1.24% 1.28% 1.30% 1.50%
30yr All-in Corporate A rated Yield

3.66%

-0.02% -0.03% -0.03% 3.71% 3.48% 3.47% 3.45% 3.72% 3.68%
US 10 Year 2.64% -0.01% -0.04% -0.04% 2.33% 2.41% 2.74% 2.86% 3.06% 2.69%
CDX IG 69.080 0.583                

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.