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The Canadian dollar: What the jobs report giveth, geopolitics taketh away

These are stories Report on Business is following Friday, Aug. 15, 2014.

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Loonie see-saw
Where the Canadian dollar's concerned, what the jobs report giveth, geopolitics taketh away.

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The loonie, as the country's dollar coin is known, rallied this morning after a new report showed the labour market fared better than believed in July.

As The Globe and Mail's Bill Curry reports, Statistics Canada today put out a new jobs report, having pulled a flawed version from a week ago, that showed hefty jobs gains last month, though all on the part-time front. Full-time positions fell, and Canada's unemployment rate dipped to 7 per cent.

Remember, the loonie had lost half a cent last Friday after the incorrect report showed just 200 jobs created, then picked up on Tuesday when the statistics agency disclosed that it had erred.

The currency was at about 91.7 cents U.S. heading into this morning's report, rising to top 92 cents after the release.

The loonie was reacting not only to the better-than-expected jobs report, which indicated at least modest labour market growth, but also a stronger manufacturing reading, noted chief currency strategist Camilla Sutton of Bank of Nova Scotia.

That suggests economic fundamentals are improving and that the Bank of Canada's timeframe for an interest rate hike is "vaguely pulled forward," she added.

"Remember that markets are a crucible where everyone's expectations are constantly measured and discounted," said Colin Cieszynski of CMC Markets.

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"Trading swings are driven by surprises and deviations from expectations. So even though full time jobs were still soft the surprise was positive (not as bad as previously reported) sparking the rally in the loonie."

Later in the day, however, fresh troubles in Ukraine rippled through financial markets, boosting the U.S. dollar against most currencies and, thus, knocking the loonie down to just shy of 91.7 cents. It did perk up yet again, though, to about 91.8 cents by late in the day.

What a difference a week makes
The revised jobs report showed a sharp gain of 42,000 jobs, compared to the original 200 in the flawed report, with better news on the full-time front, if you can call it that.

Canada still lost more than 18,000 full-time jobs in July, but that was better than what was originally reported, while part-time positions surged by almost 60,000, Statistics Canada said.

The jobless rate dipped to 7 per cent from 7.1 per cent.

Some other key numbers: The participation rate, which shows those working or still searching for a job, held at 66.1 per cent, compared to what had been a dip to 65.9 per cent in the incorrect report. The employment rate, or the percentage of those employed in the adult population, held at 61.4 per cent, compared to last week's reading of 61.3 per cent.

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You've got to put it in perspective, of course. It's not that it's a stellar showing, but rather a better reading.

Full-time work still dropped markedly, just not as badly as in the initial reading. And there are still almost 1.4 million Canadians without work.

"On a 12-month moving average basis, Canada is creating on average roughly 13,000/month, mostly in the private sector, and mostly part-time," said senior economist Krishen Rangasamy of National Bank.

"So, even with the upward revisions, the overall long-term trend is one of a Canadian labour market that is creating jobs but not at an impressive pace."

Though Canada's labour market is lagging, economists pointed to the new reading as a sign of hope.

"It hopefully represents an initial move to stronger employment gains over the second half of the year following a disappointing first half," said assistant chief economist Paul Ferley of Royal Bank of Canada.

"Our forecast assumes that continued gains in exports will provide the catalyst to firms increasing both human and physical capital going forward," he added.

"As the economic data provide confirmation of this outlook, the Bank of Canada is expected to start withdrawing some of the current monetary policy accommodation with our forecast assuming sufficient evidence will be apparent in the second quarter of next year at which time the bank will raise the overnight rate by 25 basis points."

Home sales, prices climb
The number of existing homes that changed hands in Canada during July was the highest since March of 2010, the Canadian Real Estate Association said today.

Sales were up 7.2 per cent from July of 2013. They rose 0.8 per cent from June on a seasonally-adjusted basis, according to the association, which represents realtors across the country. That marks the sixth month in a row of rising sales, The Globe and Mail's Tara Perkins reports.

Sales activity so far this year is now up 4.7 per cent compared to the same period last year, and is in line with the average amount of sales over the past decade, CREA said.

The average Canadian sales price in July, meanwhile, was 5 per cent higher than a year earlier, at $401,585. If you exclude Vancouver and Toronto from the mix, average prices rose 4 per cent to $327,988.

BlackBerry on the rise
BlackBerry Ltd. shipments are on the rise, albeit slightly, under new CEO John Chen.

A report yesterday from researcher IDC showed BlackBerry's operating system capturing 0.5 per cent of the market in the second quarter of the year.

That's down from a year earlier and the same level as the first quarter. But smartphone shipments rose in the latest period to 1.5 million from the first three months of the year.

That marks a 78-per-cent drop from a year ago but the quarter-over-quarter gain is still notable for the company in the midst of a turnaround.

"Following three consecutive quarters of sequential decline, BlackBerry volumes have rebounded slightly from the previous quarter, but remain 78 per cent lower than shipment levels from a year ago," IDC said.

"In keeping with its strategy, BlackBerry saw improvement within one of its key markets, Asia/Pacific, as well as some gains among enterprise users within North America and Western Europe."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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