Canada's economy shed 41,700 jobs in August, reversing July's 75,100 gain and missing forecasts for a 15,000 increase. Wage growth slowed to its weakest pace in almost a decade, while USD/CAD jumped after the release as a stronger US jobs report added to the divergence.
Employment swings sharply negative
Canada's labor market lost 41,700 jobs in August, StatsCan data released Friday showed, a sharp reversal from July's 75,100 job additions. The decline came in well below the roughly 15,000 gain analysts had forecast. Full-time positions accounted for most of the drop, falling 35,900, while part-time roles fell by 5,800. The unemployment rate held at 6.4%, matching expectations, but the participation rate slipped from 65.1% to 65.0%, meaning fewer people were actively in the labor force.
Services-producing industries bore the brunt of the decline, shedding 51,500 jobs, led by business, building and support services and wholesale and retail trade. Manufacturing was the lone bright spot, adding 22,100 jobs — the only industry StatsCan flagged as posting a statistically significant increase. Public-sector employment fell for a third straight month, down 78,000 since May.
Wage growth cools to a seven-year low
Average hourly wages for permanent employees rose just 2.0% year over year, down from 3.0% in July and below the 3.0% estimate — the lowest reading in more than seven years outside the pandemic. That combination of falling employment, weaker participation and cooling wages should ease pressure on the Bank of Canada to tighten interest rate policy further.
Still, the August drop follows cumulative employment growth of 181,000 from April through July, so the report reads as a sharp setback after a stronger run rather than confirmation of an outright downturn. According to Investinglive: "one month does not yet establish a broader deterioration in Canada's labor market".
USD/CAD breaks above key resistance
The weak Canadian print, paired with a stronger US jobs report, sent USD/CAD sharply higher. The pair moved back above its 200-day moving average at 1.3836, then cleared the 100-hour and 200-hour moving averages near 1.3850 and 1.38587.
Next resistance sits at the 38.2% retracement near 1.3882, with the 200-day moving average at 1.3836 now marking the key risk level for buyers should the breakout fail.
Sources: ActionForex, Investinglive, Investing.com
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