- The unemployment rate in Canada rose to 6.9% in April.
- The USD/CAD is marginally quoted down on the day about 1,3900.
The unemployment rate in Canada increased slightly 6.9% in April from 6.7% in March, Statistics Canada reported Friday. This reading exceeded the market expectation of 6.8%.
In this period, the net employment variation increased by 7.4K, a notable improvement with respect to the 32.6K drop recorded in March. Other details of the report showed that the participation rate rose to 65.3% from 65.2%, while average hourly salaries increased 3.5% in interannual terms, matching the March increase.
Market reaction
The USD/CAD did not show an immediate reaction from the market to these figures and was marginally quoting downward in the day to 1,3905.
FAQS EMPLOYMENT
The conditions of the labor market are a key element to evaluate the health of an economy and, therefore, a key factor for the assessment of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and, therefore, for economic growth, which drives the value of the local currency. On the other hand, a very adjusted labor market – a situation in which there is a shortage of workers to cover vacancies – can also have implications in inflation levels and, therefore, in monetary policy, since a low labor supply and high demand lead to higher wages.
The rhythm to which salaries grow in an economy is key to political leaders. A high salary growth means that households have more money to spend, which usually translates into increases in consumer goods. Unlike other more volatile inflation sources, such as energy prices, salary growth is considered a key component of the underlying and persistent inflation, since it is unlikely that salary increases will fall apart. Central banks around the world pay close attention to salary growth data when deciding their monetary policy.
The weight that each central bank assigns to the conditions of the labor market depends on its objectives. Some central banks have explicitly related mandates to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the double mandate to promote maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to maintain inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for the authorities given its importance as an indicator of the health of the economy and its direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
