Morning Minutes 10/05/2018

Morning Minutes

Nonfarm Payrolls and Canada Jobs Data Heavily Distorted

October 5, 2018
9:15 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

A big week for economic reports wraps up with a flurry of announcements that on balance appears to have been seen by the street as reflecting a strong North American economy and continuing rate hikes in the US and Canada. In the minutes following the announcements, there has been some fluctuation but overall, we’re seeing US treasury yields building on Thursday’s breakouts and indices slipping back continuing the declines that started yesterday. The Loonie and the US Dollar index are holding steady on the news.

The US Nonfarm payrolls report was very distorted. What looks at first glance as a big disappointment in the headline number of 135K for September which was way below the 185K street estimate, is more than offset by a huge 69K upward revision to August payrolls to 270K. Stripping out the revision, payrolls would have been 204K above street and above 200K. The unemployment rate fell to 3.7% from 3.9% and beat the street. Average hourly earnings growth of 2.8% was in line with expectations and indicates continuing upward wage inflation pressure. Overall, the report indicates a strong US economy.

Canadian employment figures showed a huge rebound in hiring with a 63K September jump more than making up for August’s 51K decline. During the month full time employment fell by 16K while part time employment rose by 80K. This is a reversal of August
where full time employment rose by 40K and part time jobs fell by 90K. Over the two months it looks like a moderate increase in full-time and a moderate decrease in part time, a shift that reflects a strong economy.

US and Canada trade data was mixed. A US deficit of $53.2B was slightly better than expected while a surprise $0.5B surplus for Canada was disappointing.

Relative Strength and Sector Rotation Report:
Boosted by strong Q3 earnings guidance attributed to high volumes, a sign of economic strength, Canadian railroads strengthened while US railroads held their ground in their
respective rankings. Canada railroads rallied, US rails held their own on CP earnings guidance increase.
Although a number of stocks fell in yesterday’s market selloff, US luxury goods companies and specialty retailers showed particular relative weakness.

SIA Wealth In The Media:
Colin Cieszynski’s weekly podcast includes comments on the North American economy, Canadian Pacific’s higher guidance, US-Canada trade, rising treasury yields, stock markets and more. Colin’s part starts 30 minutes into the hour.

Colin Cieszynski was recently quoted by Dow Jones’ on Gold.
Gold settles lower for a second straight session

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