The Daily Chase: Rate cut odds increase after jobs reports

Here are five things you need to know this morning:

Rate cut odds increase after jobless rate ticks up: Statistics Canada published the November jobs report this morning and while it wouldn’t be hard to put a positive spin on the headline number, the overall market reaction seems solidly negative. First, the good news: Canada’s economy added more than 50,000 jobs last month, mostly of the full-time variety. That tally is twice as many as economists were expecting. But more people were looking for work, too, which is why the jobless rate moved up three ticks to 6.8 per cent. That’s the highest tally since it hit seven per cent in September 2021. Traders quickly digested the news and upped their bets of a super-sized rate cut by the Bank of Canada next week. This time yesterday, the odds of a 50-point cut were about 50/50. This morning, they’re over 70 per cent.

U.S. jobless rate also rises: It’s a similar story south of the border, as the U.S. economy added 227,000 new jobs during the month. That was slightly better than expectations, but there too the jobless rate came in higher than expected because more people were seeking work. The unemployment rate came in at 4.2 per cent, worse than the 4.1 per cent expectation. Traders in the U.S. also upped their bets of a central bank rate cut next week from about 70 per cent before the numbers to almost 90 per cent after.

Canada’s car output plunges to new low: Canadian automobile plants are on track to produce only about 1.3 million new vehicles this year, according to a new report. Outside of the COVID-19 years where factories were idled, that’s the lowest tally in decades. As recently as 2018 Canadian car plants were cranking out in excess of 2 million vehicles a year, but reduced demand in the main export market of the U.S. has slowed output to a crawl. Even more eye opening is that Canada has now fallen to third place in the rankings of who makes cars sold in Canada. The U.S. is far and away the biggest producer as it has been just about forever, but Canada’s lower output means the country has been surpassed by Mexico. The numbers come from a report out today from the Trillium Network for Advanced Manufacturing.

Bonuses getting bigger on Bay Street: Quarterly earnings from the big banks were up and down, but the same can’t be said of the bonus cheques, which are all headed in one direction. Royal Bank, CIBC and National Bank are poised to increase their employees’ variable compensation this year, Bloomberg is reporting, with lenders on average setting aside 12.2 per cent more this year than they did last year.

Canadian Tire to keep banking unit after considering options: After kicking the tires on alternatives, Canadian Tire has decided to retain ownership and control of its banking unit. The retailer said in a release this morning that after assessing strategic alternatives for the business, it will retain control of its banking arm. It does say, however, that it plans to substantially reduce the borrowings associated with its October 2023 repurchase of 20 per cent of the business.