Two Jobs Reports, One Hour, Opposite Signals
Statistics Canada and the US Bureau of Labor Statistics released their August employment reports within minutes of each other Friday morning, and the two economies told opposite stories. Canada shed 41,700 jobs, a sharp miss against a Bloomberg consensus for a 15,000 gain and a reversal of the 181,000 jobs added from April through July. The unemployment rate held at 6.4 per cent only because the participation rate slipped to 65.0 per cent from 65.1 per cent, meaning some of the missing jobs were absorbed by people leaving the labour force rather than counted as newly unemployed.
South of the border, US nonfarm payrolls rose 162,000, nearly triple the 53,000 economists expected and the strongest monthly gain since March. The unemployment rate held at 4.1 per cent. Fed funds futures on the CME FedWatch tool moved the odds of a September rate hike to 58 per cent, up from 49.4 per cent a day earlier, undoing much of the dovish repricing that followed Fed Governor Christopher Waller's comments Wednesday that he would lean toward holding rates steady.
The Yield Curves Split, and Neither Side Blinked
The Government of Canada 10-year yield gave back part of its post-decision climb Friday, easing 2.2 basis points to 3.775 per cent, Reuters reported, even as the comparable US 10-year Treasury yield rose toward 4.79 per cent on the stronger American print. The two benchmarks had been climbing together for most of the week; Friday split them in opposite directions within the same trading session.
The yield eased from 3.798 per cent, its level immediately after the Bank of Canada's September 2 decision, to 3.775 per cent by Friday morning. Reuters reported the move at 2.2 basis points as of 9 a.m. ET.
The split matters because the Bank of Canada had just spent its September 2 decision flagging upside inflation risk and holding at 2.25 per cent for a seventh straight meeting, a stance that pushed the 10-year to a two-year high of 3.798 per cent. A weak jobs report two days later is the kind of data that would normally argue against that hawkish framing. Instead, the Canada two-year yield barely moved, holding near 3.11 per cent, which suggests the front end of the curve is treating Friday's miss as noise rather than a signal, consistent with Statistics Canada's own note that August's figures only partly capture the new round of US tariffs that take fuller effect after Canada's planned September 8 retaliation.
Why the TSX Didn't Follow the Loonie Down
USD/CAD weakened to roughly 1.3862 by late morning, Reuters reported, its softest level for the loonie in nearly two weeks and a sharp reversal from levels below 1.38 earlier in the week, as the stronger US print and the weaker Canadian print pulled the currency in the same direction from two different starting points. Wall Street took the hawkish Fed repricing badly: the Dow fell 376.68 points to 53,309.43, the S&P 500 fell 38.00 points to 7,709.71 and the Nasdaq fell 117.03 points to 26,467.03 in late-morning trading, The Canadian Press reported.
Equity and currency figures reflect late-morning to early-afternoon trading levels; the Government of Canada 10-year move is expressed as a percentage of its yield level for comparability. Gold and WTI reflect futures contract prices.
The TSX Composite did not follow. It was up 10.72 points at 36,643.84 in late-morning trading, led by industrials, even with a weak domestic jobs report, a weaker currency and a falling US market all pointing the same direction. The connection worth naming: manufacturing was the only sector to post a meaningful August job gain, up 22,100 positions, even as the broader labour market contracted. A weaker loonie on the same morning is a direct tailwind for that same export-facing cohort. The currency reaction to Friday's jobs miss is, in effect, already offsetting part of the damage the jobs miss did to the sector most exposed to it, inside the same trading session.
That offset will not hold indefinitely. Canada's retaliatory tariffs take effect September 8, and Statistics Canada has been explicit that Friday's number does not yet reflect their full weight. The Federal Reserve meets September 15 and 16 with hike odds now back above 50 per cent for the first time in weeks. Both dates arrive before the Bank of Canada's next scheduled decision, which means this morning's divergence between the GoC and Treasury curves is a data point advisors should expect to keep moving before it settles.