A tale of two job reports

The chase by Marty Cej:

Prime Minister Harper says job creation will be among his top priorities in 2012, a good thing considering Canada's unemployment rate rose for a third straight month in December, putting the country on an uncertain footing for the new year. The unemployment rate rose to 7.5 percent from 7.4 percent last month as a gain of 17,500 new jobs was outweighed by a surge in people looking for work.

The headline gain of 17,500 failed to erase the plunge 18,600 jobs in the preceding month and was marked by a jump of 43,100 part-time positions that helped offset a tumble of 25,500 full-time jobs. Economist Doug Porter at BMO Capital Markets says "the soggy details reinforce the point that the job market struggled late last year after a banner start to 2011," and Mark Chandler at RBC notes that "the job trend will be seen as a disappointment."

The Canadian dollar dropped in the wake of the report as the market priced in the likelihood that the Bank of Canada will have to remain on the sidelines for longer or perhaps lean towards interest rate cuts if the economy deteriorates much further. We need to take a look at the new expectations for the Bank of Canada, the split between regions – Quebec shed 25,700 jobs! – and the industries that are creating jobs vs. those that are losing them. We also need to talk about the quality of the new jobs that were added this month.

And we'll also need to compare the Canadian jobs picture with the U.S. situation. The U.S. economy added 200,000 jobs last month compared to an estimate of 155,000 new non-farm jobs. The unemployment rate fell to 8.5% from 8.7%. The U.S. report will dominate price action for financial markets today.

In the meantime, European stocks are mixed, currencies and commodities are little changed, and stock index futures are pointing to a mixed open as traders await the U.S. jobs report. Also, Hungary's debt was just downgraded to 'junk' status by Moody's.

One of the more interesting markets to cover today will be base metals after Alcoa said late yesterday that it would cut its global smelting capacity by 12 percent, or 531,000 metric tons. We need to ask what the cut means to world supply and what it tells us about global demand. We also need to ask what it means for Alcoa's earnings and how it sets up the market for the start of fourth-quarter earnings season, which Alcoa kicks off on Monday.

As noted earlier this week, the negative to positive ratio of S&P 500 profit warnings vs. forecast upgrades currently sits at 3.8. In other words, almost four companies are warning for each company that is raising its guidance. The historical average is 2.2. This could be a tough earnings season if analysts don't start cutting their forecasts soon.

Among the Canadian corporate stories we're watching today is Jean Coutu, which reported a modest gain in both profit and revenue in the third quarter. The company had plenty to say about the "deflationary impact" of the introduction of many new generic drugs. Plenty to see here, folks, plenty to see.

I'm running late again and the web editors are breathing down my neck with their chai tea breath, which is intimidating in a strangely calm yet energizing way.