Canada’s employment landscape faced notable shifts in December, as the country’s unemployment rate climbed to 6.8%, up from November’s 6.5%. This increase was in direct contrast to market expectations that had expected a more palatable increase to 6.6%. The data release occurred at 13:30 GMT, providing a comprehensive overview of the job market during the final month of 2023.
The report for December had Canada losing 8,200 jobs. This outcome came as a major surprise to analysts, who had expected a decline of 5,000 jobs. This gain is incredibly good news as it indicates that certain sectors of the Canadian economy are more resilient despite Canada’s unemployment rate going up.
Wage Growth and Participation Rate
In addition to the jobs data, average hourly wages surged 3.7 percent in the last year. This represents a slowdown compared to November’s increase of 4%. This measure of wage growth is the most important because it reflects consumers’ purchasing power as well as future inflationary pressures in the economy. The labor force participation rate jumped to 65.4% in December, up from 65.1% in November. This change represents an increasing number of people out there desperately looking for work.
These figures paint a hopeful yet contradictory economic picture, one in which we can add jobs, but still see an increase in unemployment. Unemployment participation is up, showing more Canadians are joining the labour force. This increase is perhaps fueled by better economic times or an urgent need for a job.
Central Bank Policy and Economic Indicators
Canada’s central bank has voted to hold the line on interest rates at 2.25% during its past two monetary policy meetings. They think this modest approach is just the ticket for maintaining inflation near their preferred target of 2%. The bank’s stance seeks to strike a balance between fostering economic growth and curbing inflation, a careful judgment amid changing employment data.
As markets continued to digest the employment report, the USD/CAD exchange rate continued its rally, climbing above the 1.3871 mark. This movement comes ahead of the United States’ non-farm payroll data release, suggesting heightened market activity and speculation regarding future economic trends. One positive, according to analysts, was that the 14-day RSI at 60 shows climbing momentum without overbought readings.
The USD/CAD pair remains well-supported above the 20-day Exponential Moving Average (EMA) at 1.3793. Collectively, this posture increases the likelihood of a near-term bullish trend. The pair has neared an important 61.8% Fibonacci retracement on the daily chart at 1.3894, from the most recent peaks and troughs.