The Week Ahead (MSM and STZ Earnings; US Nonfarm Payrolls Report and Canada Unemployment Rate)

This report will cover the quarter that encompasses the Cinco de Mayo festivities, and analysts anticipate insights regarding the onset of the summer season, which influences the ongoing quarter's performance. Beyond the earnings and the present business conditions, our focus remains on seeking signs of progress within the company's underperforming wine and spirits division.

The U.S. stock market will not be open on Thursday due to the Independence Day celebration. Even though it's a public holiday, the schedule for U.S. economic events in the next week is still quite full.

Before the 4th of July, crucial ISM data on manufacturing and services will be released. Consensus estimate for the manufacturing index is for a 49.2 reading, slightly higher than the May figure.

Additionally, on Wednesday, the minutes from the Federal Open Market Committee's meeting in June will be released.

The employment data from JOLTS and ADP will pave the way for the release of the nonfarm payrolls report for June, scheduled for Friday. It is expected to show 7.85 million job openings as of the final business day in May, representing a decrease of about 150,000 from April.

Economists expect to see an addition of 180,000 jobs to the payrolls, an unemployment rate that remains steady at 4.0% as it was in May, and a 4% yearly rise in hourly earnings (a slight decrease from May's 4.1% figure).

The tick-up in Canadian inflation in May followed a string of downside surprises this year, and further signs of softening in labour markets would help to reassure the Bank of Canada that inflation pressures are more likely to drift lower going forward.

The market expects employment continued to inch higher, but alongside another increase in the unemployment rate to 6.3% in June, as labour force growth outpaced hiring again because the population continued to surge.

Wage growth in the labour force survey has remained persistently high, but other estimates of wages from business payrolls have been showing more signs of softening. The combination of fewer job openings – which continued to decline into June – and higher unemployment is tilting bargaining power in wage negotiations away from workers.

Overall, a softer labour market report should take some of the heat away from the upside CPI surprise in May. RBC continues to expect inflation will drift broadly lower this year and looks for another 25 basis point cut from the BoC at its next meeting in July to build on the first cut in June.