AGF Weekly Perspectives – January 8th Update
Author: Portfolio Specialist Group
January 8, 2018
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
Canadian employment surges again
- The Canadian economy added 78,600 jobs in December, following a strong jobs report in November. Services led hiring in December with strong additions in the finance and education categories, while manufacturing and health care lagged. All ten provinces reported net hiring in December, led by Quebec and Alberta.
- Despite a higher participation rate, the unemployment rate fell to 5.7%, from 5.9%, matching the lows reached in 1974. Average hourly wage growth dipped slightly to 2.9% annualized, while hours worked increased by 3.1% annualized.
- Canadian employment grew every month in 2017, leading to its strongest calendar-year percentage gain in 15 years, rising 2.3%
U.S. payrolls miss expectations
- U.S. nonfarm payrolls missed consensus estimates with 148,000 jobs added and the unemployment rate held at 4.1% in December. Goods-producing categories rose strongly, led by construction and manufacturing, while services categories decelerated during the month.
- Interestingly, retail jobs fell 20,000 in what is traditionally a strong month for holiday employment, pointing to the decline of brick and mortar stores in favour of online shopping.
- Average hourly earnings rose 0.3% and aggregate hours worked increased 0.2% in December, with both measures up 2.5% from a year ago. December’s report concludes 2017 as the seventh consecutive year in which two million or more jobs were added.
Global manufacturing advances
- The eurozone led global activity in December with the manufacturing PMI reaching 60.6, its strongest level recorded since the survey began in 1997 as Germany continues to drive activity in the region.
- Manufacturing in China rebounded slightly in December, rising to 51.5, from 50.8, and Japan recorded its strongest month in over three years, reaching 54.0.
- The U.S. ISM Manufacturing Index rose a better-than-expected 1.5 points to 59.7 in December, nearing highs last reached in 2004. Four of five components advanced, led by new orders as the overall economy grew for the 103rd consecutive month.
Other economic news
- Eurozone inflation slowed to 1.4% year-over-year in December, down from 1.5% in the prior month. Lower food and energy prices pulled the headline figure lower while core inflation remained unchanged at 0.9% annualized, validating the European Central Bank’s commitment to accommodative policy.
- Minutes from the U.S. Federal Reserve’s December meeting showed a division amongst voting members over whether to hike rates in the face of low inflation, before ultimately implementing a 25 basis points hike. Discussion was focused around financial conditions, which remain accommodative, and the flattening of the yield curve, which the Fed does not yet appear overly concerned with.
What’s to come
U.S. inflation, eurozone unemployment
- The U.S. reports inflation and retail sales data next week, which if strong enough, could sway the Federal Reserve towards a January rate hike. In the eurozone, employment, retail sales and industrial production will be reported during the week.