The yield on Canadian government bonds for 10 years fell to 3.14%, after employment in Canada decreased by 2.8 thousand jobs in July 2024, following a drop of 1.4 thousand jobs in the previous month and much lower than expectations for an increase of 22.5 thousand jobs.

Canadian Bond Yield
The rise in Canadian bond yields halted after reaching 3.2% on August 8, slightly retreating due to increasing expectations for a dovish stance from the Bank of Canada following weak labor data. The unemployment rate in Canada remained steady at 6.4%, the highest level in over two and a half years.

Weak Labor Market
Although slightly below market expectations, the data still indicates a weak labor market, with net employment decreasing for the second consecutive month and labor force participation reaching its lowest level since 1998, excluding pandemic-related disruptions.

Manufacturing
Additionally, the ongoing contraction in the manufacturing sector and slow economic growth has heightened expectations for continued interest rate cuts by the Bank of Canada, which has restricted support for yields.

Canadian Dollar
The Canadian dollar was trading at 1.374 against the U.S. dollar, halting the rise that boosted the Canadian dollar to 1.37 on August 8, as weak employment data aligned with the Bank of Canada's dovish expectations. The unemployment rate in Canada remained at 6.4%, the highest level in over two and a half years.

Market Expectations
While this figure was below market expectations, it still indicates weakness in the labor market as net employment unexpectedly decreased for the second month and the labor force participation rate fell to its lowest level since 1998 when excluding pandemic shocks.

Contraction
Moreover, the ongoing contraction in Canadian manufacturing and modest economic growth has increased the likelihood of further easing by the Bank of Canada, adding pressure to the attractiveness of the Canadian dollar.

Meanwhile, the Federal Reserve has not yet begun a rate-cutting cycle, with mixed expectations for a first cut in September.

Employment
Employment in Canada fell by 2.8 thousand marginal jobs in July 2024, following a decrease of 1.4 thousand jobs in the previous month and well below expectations for an increase of 22.5 thousand jobs.

Full-time jobs saw an increase of 62 thousand jobs, while part-time jobs decreased by 64 thousand jobs.

Wholesale and Retail
Wholesale and retail trade saw declines (-44 thousand jobs; -1.5%) and finance, insurance, real estate and rental leasing (-15 thousand jobs; -1%), while gains were noted in public administration (+20 thousand jobs; +1.6%) and transportation and warehousing (+15 thousand jobs; +1.4%).

At the regional level, jobs in Manitoba fell (-5400 jobs; -0.8%), but rose in Ontario (+22 thousand jobs; +0.3%) and Saskatchewan (+6700 jobs; +1.1%).

Unemployment
The unemployment rate in Canada was 6.4% in July 2024, unchanged from the highest level in January 2022 in the previous month and below expectations of 6.5%.

While better than market expectations, the result still indicates that the labor market in Canada continued to show the slowdown anticipated by the Bank of Canada’s board in its latest interest rate cuts, with net employment dropping by 2800 to 20513600, marking the second consecutive decline, sharply contrasting with expectations for an increase of 22500.

However, the number of unemployed decreased by 8600 to 1398500 during the period, consistent with a 0.3 percentage point decline in the labor force participation rate to its lowest level in over two years at 65%, the lowest level since 1998 when excluding pandemic shocks, preventing a rise in the unemployment rate.