Done deal

There's no longer any reason to doubt that the US Federal Reserve will boost the Fed funds target by 0.25% when it meets at mid-month.  This morning's news that the US economy added 211,000 jobs in November -- almost exactly in line with the 6-month average -- means that the Fed has all the evidence it needs to hike rates for the first time in almost a decade.

With the unemployment rate at a six-year low of 5.0 percent, and wage growth showing signs of accelerating (albeit remaining modest at 2.3 percent year-on-year), the Fed has a lot of work to do before it gets rates back to what we used to think of as "normal" levels.  Even so, Ms Yellen and her colleagues are unlikely to be in any hurry to get the job done. With inflation at the consumer level firmly under control, the Fed can take its time to assess the impact of each move it makes before deciding on what to do next. It would be a surprise if rates were to rise by more than 100 basis points (1 percentage point) over the course of 2016.

Meanwhile, north of the border.... StatsCan reported today that the economy shed almost 36,000 jobs in November, edging the jobless rate back up to 7.1 percent.  This was well above the market consensus of 10,000 jobs lost, which mainly tells you that the people contributing to that consensus weren't paying attention.  StatsCan had clearly flagged the fact that the unexpectedly strong job gain in October was largely the result of election-related hiring that would almost certainly prove temporary. Lo-and-behold, that's exactly what happened, with a loss of 32,500 public administration jobs almost entirely accounting for the overall decline.

Leaving aside the election-related statistical noise, the report was not all bad news. Those public administration jobs that vanished were part of a 72,000 loss in part-time positions in the month.  However, there were reportedly 36,000 full time jobs added in the month, always assuming that you can believe StatsCan's notoriously volatile numbers. Predictably, the worst single performance was seen in Alberta, which lost 15,000 jobs in the month, and where the unemployment rate is now almost equal to the national average.

Needless to say, these numbers will leave the Bank of Canada watching from the sidelines as the Fed makes its first move. Many Bay Street economists are arguing that the coming divergence in the direction of monetary policy between the two countries spells further weakness for the Canadian dollar.  This is not necessarily true: the scenario in which the Fed raises rates gradually for many months, while the BoC stands pat, has been effectively priced into the exchange rate for some time. That's not to say there's any upside for the Canadian dollar, but unless the Fed is unexpectedly aggressive (which can largely be ruled out) or there's a further sharp fall in oil prices (which can't), the exchange rate is likely to wallow near recent levels over the next few months.  Or at least, pretty please, until after my trip down south next month!