Royal Bank of Canada analysts say that unemployment in Canada is likely to continue to rise. The biggest reason is the ongoing trade war between the United States and Canada, which is likely to damage not only a variety of market sectors, but also hurt entire regions that count on trade deals to make their economies hum. But the iShares S&P / TSX 60 Index fund (TSE:XIU) shrugged this off, with shares up fractionally in Thursday morning’s trading.
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Tariff uncertainty has led to Canadian businesses paring back their hiring plans, setting something of a ceiling on employment rates. However, the floor is also dropping out from under Canadian workers as job losses are hitting particularly hard in “…sectors and regions reliant on trade.” That is the word from RBC analyst Rachel Battaglia.
Early numbers support this assertion. One of Canada’s biggest manufacturing hubs, Ontario, represents about 60% of the rise in unemployment by itself. And even within Ontario, most of the unemployment rise can be traced back to southwestern Ontario, a major manufacturing hub. Reports note that four out of five of the country’s highest unemployment rates—including Windsor at 11.2%—can be traced back to this region. Peterborough comes in at 10% even, Oshawa follows at 9.3% and Toronto comes in at 8.7%.
Surprise Unemployment Drops
Yet not all the information supports Battaglia’s assertions. Just days ago, the Canadian economy saw 83,000 new jobs added, which sent unemployment overall down to 6.9%. That represented a 0.1% drop in the overall unemployment rate between May and June. Economists were actually expecting a similar gain in unemployment overall, expecting the rate to hit 7.1% instead.
Though even this came with some cautionary caveats; most of the jobs added were part-time jobs. Wholesale and retail trade posted the biggest gains, with 34,000 new positions. Healthcare and social assistance followed with 17,000 jobs. Only one sector actually saw a net job loss, with the agriculture sector losing 6,000 jobs.
Is the iShares S&P / TSX 60 Index ETF a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:XIU shares based on 52 Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After an 18.3% rally in its share price over the past year, the average TSE:XIU price target of $44.32 per share implies 7.63% upside potential.
