THE TAKEAWAY: CAD Net Change in Employment, Unemployment Rate (JUL) > All of losses come from Part-time Employment > USDCAD Bullish

The Canadian labor market appears weaker than most expect, at least according to the July reading. The Canadian Unemployment Rate inched higher to 7.3% from 7.2% as the economy shed some -30.4K jobs, well-below the +6.0K consensus forecast, according to a Bloomberg News survey. This is approximately a 4 standard deviation miss and represents a loss of nearly five times the expected gains. Certainly, this big of a miss represents a major disappointment.

However, despite the disappointing headline figure, the underlying components are promising. The entirety of the jobs losses are due to a drop in part-time employment (-51.6K actual versus -22.0K prior), while full-time employment increased (+21.3K actual versus +29.3K prior). Accordingly, this shifting composition of the Canadian labor market subtly suggests that the economy is getting stronger, as the employment situation is becoming more crystallized (firms would not drop part-time workers and increase full-time workers if conditions were not projected to be stable if not improving over the medium-term).

USDCAD 1-minute Chart: August 10, 2012

Canadian_Dollar_Sells-off_Following_Big_Miss_on_July_Labor_Market_Report_body_Picture_5.png, Canadian Dollar Sells-off Following Big Miss on July Labor Market Report

Charts Created using Marketscope – Prepared by Christopher Vecchio

In the wake of the news, the Canadian Dollar was under pressure across the board, as the headline reading evidently drove the initial reaction. The USDCAD appreciated from 0.9947 to as high 0.9970 following the release; however, as traders reconsidered the data, the USDCAD pulled back to 0.9954, at the time this report was written. Similar price action was observed in the CADJPY, which weakened initially on the release.

--- Written by Christopher Vecchio, Currency Analyst

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