This is a theme I've highlighted before

Canada and US labor force participation

National Bank is out wit ha chart today that's tough to believe. It shows the 7-percentage point divergence in Canadian and US labor force participation among prime age workers.

They were equal until 2000 but have diverged and since the pandemic the divergence has been amplified. Canada is now at long-term highs in prime age participation while the US still has a long way to go to get back to pre-covid.

The countries share much in terms of culture and demographics so it's a tough one to square. US political commentators often point to US covid benefits as keeping people from working but programs in Canada were arguably more generous. Both countries have abundant job openings.

National Bank highlights a comment in the FOMC minutes where "various participants suggested that a complete return to pre-pandemic conditions was unlikely, as the pandemic had prompted reductions in the workforce that were likely to persist."

Critical to the Fed rate hike debate is where full employment really is. If there are +2 points of prime age workers out there, then we're still a ways off.

For Canada, meanwhile, there might not be enough divergence priced into the rates market. Today's BOC business outlook survey was optimistic, inflationary and suggested strong investment/hiring t is coming. With 88.5% of prime age workers already working, there's not much low hanging fruit out there.

USD/CAD is taking a small break today but there isn't much standing in the way of 1.20.

USDCAD chart