Canadian employment report chart
Canada job gains

USD/CAD is threatening Tuesday's low despite the softening of oil prices.

The strength in the loonie is partly due to a strong Canadian employment report today. The economy added 54,700 jobs compared 24,500 expected. That was driven by sizzling 122,500 jump in full time jobs. The unemployment rate fell to 5.9% compared to the 6.0% consensus estimate.

Economists at CIBC were generally encouraged by the report and saw the only real negative as the deceleration in wage growth to 2.7% from 3.0% y/y.

While not all of the detail was as positive as the headline reading, today's report still suggests that the economy was very close to full employment in December. However, with the survey period coming relatively early in the month (December 5-11) it would have captured a high point for the Canadian economy. Disruptions from flooding in BC should have been easing, while on the other hand tightening restrictions on service industries to battle the Omicron wave hit closer to month-end. The further tightening of restrictions at the start of January likely sets us up for a notable decline in the jobs tally to start 2022, albeit maybe not as large as in prior virus waves given that companies may be reluctant to let staff go due to the difficulties they faced recruiting in the reopening phase.

Despite the worries for the Canadian economy and the current struggle against covid, there's a head-and-shoulders top that's nearing a break of the neckline on the chart.

USDCAD daily chart Jan 7 2022