Canadian employment for June declined by 2.2.k

Posted: Friday, July 5, 2019 - 09:35 EDT

Canadian employment for June declined by 2.2k missing expectations for an increase of 9.9k.  All the jobs lost were part-time, which declined by 26.2k, while full-time employment increased by 24.1k.  The unemployment rate ticked higher by 0.1% from their all-time lows in the previous month to 5.5%.  The participation rate remained consistent at 65.7%.  The service-producing and health care sectors drove gains while manufacturing and retail declined over the month.  Details of the jobs report were generally positive given that employment losses were primarily part-time work while hourly wages increased from 2.6% to 3.6%.  On average, the Canadian economy is still averaging just over 41k jobs per month.

The U.S. also released non-farm payrolls adding 224k jobs and beating expectations for an increase of 160k.  Two-month revisions were lower by 11k.  The unemployment rate did tick higher by 0.1% to 3.7% given that the labour force participation rate increased by the same margin to 62.9%.  Average hourly earnings increased by 0.2% over the month and at a rate of 3.1% on a yearly basis.  The stronger jobs data in the U.S. is providing support for the U.S. dollar while front-end Treasury rates are higher by 8-9bps.

Given the Fourth of July holiday, flows were muted in the Canadian corporate credit market.  There was some picking away at credit given that the positive tone skewed trades towards buying.  There was also buyers stepping into Sobeys after DBRS put the company back to an investment grade rating of BBB (low) from BB(high).  The last quarter of positive earnings has helped the company’s margins that should lead to potential deleveraging.  Currently the S&P has Sobeys rated BB+ with a positive outlook.  Otherwise, corporate credit spreads were generally unchanged yesterday although the better tone may lead to spreads grinding tighter today.

Equity Markets:

  Index Level % Change QTD YTD Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
S&P 500 2,995.82 0.77% 1.87% 20.75% -0.76% 3.43%

7.71%

-13.52% 13.65% 4.30%
TSX

16,588.85

0.08%

1.26%

17.69%

-4.52% 6.77%

-0.56%

-10.11% 13.29% 2.58%

Rates:

 

Today

% Change

QTD change

YTD change

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Canada 5 Year

1.50%

0.09%

0.11%

-0.38% 1.97% 2.07% 2.34% 1.89% 1.52% 1.39%
Canada 10 Year 1.55% 0.09% 0.08% -0.42% 2.09% 2.17% 2.43% 1.97% 1.62% 1.47%
Canada 30 Year 1.72% 0.07% 0.04% -0.46% 2.23% 2.21% 2.42% 2.18% 1.89% 1.69%
30yr Generic Corporate A rated Spread 1.40% 0.00% 0.00% 0.00% 1.24% 1.28% 1.30% 1.50% 1.50% 1.40%
30yr All-in Corporate A rated Yield

3.12%

0.07% 0.04% 0.04% 3.47% 3.45% 3.72% 3.68% 3.39% 3.09%
US 10 Year 1.96% 0.01% -0.05% -0.72% 2.74% 2.86% 3.06% 3.06% 2.69% 2.41%
CDX IG 53.360 1.692                

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.