Canada Unemployment Rate rises to 6.9% in April vs. 6.8% expected
- The Unemployment Rate in Canada rose to 6.9% in April.
- USD/CAD trades marginally lower on the day near 1.3900.
The Unemployment Rate in Canada edged higher to 6.9% in April from 6.7% in March, Statistics Canada reported on Friday. This reading came in above the market expectation of 6.8%.
In this period, the Net Change in Employment was up 7.4K, a noticeable improvement from the 32.6K decline recorded in March. Other details of the report showed that the Participation Rate ticked up to 65.3% from 65.2%, while the Average Hourly Wages rose by 3.5% on a yearly basis, matching March's increase.
Market reaction
USD/CAD showed no immediate market reaction to these figures and was last seen trading marginally lower on the day at 1.3905.
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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