Canada: Unemployment Rate held steady at 6.7% in March
- The Unemployment Rate in Canada was unchanged last month.
- USD/CAD flirts with its 200-day SMA in the low-1.3800s.
Statistics Canada reported on Friday that the Unemployment Rate helds steady at 6.7% in March, coming short of what markets were expecting.
Additionally, the Net Change in Employment increased by 14.1K jobs, reversing the 83.9K drop we saw in the prior month. In addition, the participation rate stayed the same at 64.9%, and wages are still growing at a 5.1% annual pace, up from February’s 4.2% annual gain.
Market reaction
The Canadian Dollar (CAD) maintains a negative bias following the publication of the jobs report on Friday, with USD/CAD navigating above the 1.3800 region and challenging its key 200-day SMA.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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