Unequivocally Strong North American Jobs Data

The US jobs data was consistent with the recent string of data clearly showing a surprising resilience to the anticipation and tightening of fiscal policy. The strength of the Feb report means the back month modest downward revision is largely irrelevant. 

Non-farm payrolls jumped 236k in February, well above expectations. Hourly earnings rose 0.2% and the work week increased by 0.1%. This is should help underpin output and consumption reports in the weeks ahead. Household employment (different survey) rose 170k and the unemployment rate fell 0.2% to 7.7%, the lowest since Dec 2008.

The Canadian employment data was also stronger than expected. The 50k increase in the headline was 5-times more than expected. The bulk of this (33.6k) were full time jobs, which completely offset the 20.6k full-time jobs lost in January.

Both dollars have rallied in response. The euro is giving back most of the Draghi-inspired gains scored yesterday to test the $1.30. The recent lows come in near $1.2965 and we have suggested a $1.2880 near-term target. The US dollar also extended its gains against the yen to test the JPY96.60 area, but then has been sold off back to JPY96.00. 

Just as we find that the US-German 2-year spread is tracking the euro fairly well, we find the US-Japanese 10-year spread tracks the dollar-yen rate. The strength of the employment data will renew talk of the FOMC exit ahead and US 10-year yields have jumped 8 bp to 2.08%. 

The US dollar had been testing the CAD1.03 area and today's data has seen the greenback pullback. Support is seen near CAD1.0200-20. Despite the Canadian jobs report, we remain concerned about what we see as a deterioration of the financial conditions, the loss of competitiveness through rising unit labor costs, and end of the positive terms of trade shock.