Jordan Dawes
July 07, 2023
Weekly Market Update
ADP (Automatic Data Processing) released its jobs report for June yesterday. The report showed U.S. private businesses added the highest number of jobs since February 2022, suggesting the U.S. labour market remains strong and relatively tight. The U.S. Federal Reserve Board (Fed) has signaled its intentions to keep raising rates in response to high inflation, and this jobs report likely reinforces its view that more rate increases are necessary.
- ADP reported U.S. private businesses added 497,000 jobs in June, the highest number of job additions in a month since February 2022. June’s figures easily topped the 225,000 jobs economists had expected, based on a survey from Bloomberg.
- There were significant job gains in several sectors, including leisure and hospitality, education and health, and construction. Conversely, the manufacturing and financial activities sectors shed jobs in June.
- On the other hand, potential layoffs are dwindling. U.S. employers announced 40,000 job cuts in June, which is a sharp drop from the previous month and the lowest level since October 2022.
- The stronger-than-expected jobs report heightened expectations for the Fed to raise interest rates. Minutes from the Fed’s last meeting revealed officials were split on holding interest rates steady. Recent comments by Fed Chair Jerome Powell signaled intentions by the Fed to keep lifting rates.
Equity markets in Canada and the U.S. dropped sharply yesterday (although so far rebounding slightly today), while bond yields surged higher based on the ADP report. By all accounts, the Fed still has plenty of work to do, which will likely push interest rates higher and keep them there longer. Rising rates by the Fed may nudge the Bank of Canada to lift rates further to keep pace and potentially avoid a significantly negative impact on Canada’s dollar.
As always, please give us a call if you have any questions, or if you’d like to book a portfolio review.
Kelly is off to Portugal this morning, and we’re wishing her a safe flight and a wonderful vacation. Mark is in Calgary checking out the Stampede for the first time. Mike is back in the office on Monday, and I will be away next week. Fortunately, Karen will be here throughout!
Source: CIBC Morning Market Brief