Market Recap: U.S. and Canada

In the markets, it was an excellent week across the board, with every major index finishing solidly in the green. Tech led the charge for most of the week, pulled back midweek, then rallied sharply into Friday's close, helped along by a jobs report that came in weaker than expected and fed hopes for a September rate cut. The TSX lagged its US counterparts for most of the week before catching up into the close.

Here are this week’s stellar numbers: The Nasdaq 100 led with a weekly gain of 5.12%, followed by the S&P 500 at 3.58%. The TSX wasn't far behind at 3.25%, while the Dow Jones brought up the rear with a gain of 2.96%.

Major Economic Stories | At a Glance

Job Openings Slip Again As Hiring Stays Frozen

Job openings fell to 7.36 million in June, down 178,000 from May's downwardly revised total and below the 7.4 million economists expected. The pullback was led by steep declines in healthcare and leisure and hospitality, even as hires and separations both held roughly steady, a sign employers are neither hiring aggressively nor letting people go.

• Quits rate: unchanged at 2%, matching the subdued pace seen since last year

• Layoffs rate: steady at 1.1%, still within its recent range

• Sectors bucking the trend: transportation and warehousing (+97,000) and federal government (+39,000)

• May revision: openings revised down 57,000 to 7.54 million

US Unemployment Rate Falls For The Wrong Reasons

The US economy lost 23,000 jobs in July, a sharp reversal from June's downwardly revised gain of 20,000 and far short of the roughly 83,000 economists expected. The unemployment rate still dipped to 4.1% from 4.2%, but only because the labour force shrank by 264,000 people. That pulled participation down to 61.4%.

• Combined May-June revisions: down 103,000 jobs from initial estimates

• Employment-population ratio: 58.9%, the lowest since September 2021

• Average hourly earnings: up just 0.1% for the month, slowing the annual rate to 3.2%

• Healthcare: the lone bright spot, adding 22,000 jobs while local government and retail trade both shed workers

Canada's Unemployment Rate Hits A Two-Year Low

Canada added 75,100 jobs in July, far outpacing the 15,000 economists expected, pushing the unemployment rate down to 6.4% from 6.5%, its lowest level in two years. The gains were broad based across wholesale and retail trade, finance and professional services. Wage growth cooled to 2.8% year over year from 3.3% in June.

• Participation rate: up 0.1 points to 65.1%, the highest so far this year

• Core-aged women: unemployment rate fell to a record low of 5.2%

• Youth unemployment: eased to 12.6% from 12.7%

• Employment since April: up 181,000, with full-time work accounting for the bulk of the gain

TOP INSIGHTS

The Unemployment Rate Is Lying To You Right Now

As usual, the headlines will treat the drop in the US unemployment rate 4.1% as a solid number, but the drop comes almost solely because of more people leaving the labour force, not because of stronger hiring. When we view this in combination with a JOLTS report showing both hiring and layoffs stuck near multi-year lows, it points to a labour market where workers who lose a job face a genuinely hard time finding another one, so many are simply stepping back from the search entirely.

For households, that shows up as fewer options, but not necessarily a wave of pink slips. Someone hoping to switch jobs, negotiate a raise, or push for better hours has far less leverage than a falling unemployment rate implies, because employers know there's nowhere else for workers to go. For markets, a labour market this frozen keeps a lid on inflation pressure from wages, which is part of why rate cut bets firmed up so quickly after Friday's numbers.

I think investors are reading this purely as good news for rate cuts, and futures certainly reacted that way. But I'd be careful celebrating a falling unemployment rate that owes more to discouraged workers giving up than to genuine hiring strength. Here's what I'm watching: whether participation keeps sliding into the fall, because that would confirm this isn't just a one-month blip. I’ll cover that next month when fresh numbers are out.

Canada's Jobs Market Is Beating America's Right Now

The contrast between this week's two jobs reports is hard to miss. The US lost jobs and only saw its unemployment rate fall because people gave up looking for work, while Canada added jobs on the back of real hiring, spread across a wide swath of industries rather than concentrated in one sector like healthcare. That's an unusual divergence for our two economies, which typically move together.

That broader base of Canadian hiring, paired with slowing wage growth, points to a labour market settling into balance rather than overheating, and that gives the Bank of Canada more room to be patient. For American households, the comparison lands a bit harder. The same week Canada's jobless rate hit its lowest point in two years, the US figure fell for reasons that had nothing to do with underlying strength.

Markets Cheered Bad Jobs Data, And That Says A Lot

As I briefly mentioned above, Friday's market reaction to the BLS release was almost the opposite of what you'd expect from a jobs report that badly missed forecasts. Stocks rallied, bond yields fell, and bets on future Fed hikes eased almost immediately, as traders decided weak data was more likely to speed up rate relief than trigger real alarm about the economy. That's a market treating bad economic news as good news for monetary policy, a dynamic that only works until the data gets bad enough to change the story.

For everyday investors, this creates a strange incentive structure where portfolios can do well even as the job market cools, at least for a while. I guess you could call that the good news. For workers and job seekers, though, the picture isn’t as pretty. A market rally doesn't create job openings or push wages higher, and the disconnect between what's good for stocks and what's good for households is only getting wider.

My bet is that this dynamic has a shelf life. Markets can celebrate weak data as a rate cut signal for a few months, but if hiring keeps deteriorating the way July's report indicates, eventually that narrative flips and weak data start reading as recession risk instead of rate relief. Let’s watch the August and September reports closely to see which story wins out.

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TOP STORY
US Jobs Report Shows Cracks Beneath The Surface

• US economy unexpectedly lost 23,000 jobs in July

• Unemployment rate dipped to 4.1 percent as workers left

• May and June job gains were revised down sharply

• Wage growth slowed to its weakest pace in years

I know I covered this above, but what’s happening in the US job market deserves our attention so please bear with me. Friday's jobs report landed with an absolute thud, coming in well below what economists expected and reviving worries that the labour market's calm exterior hides real cracks underneath. Hiring has essentially frozen while more people left the workforce altogether, and healthcare was about the only sector still adding jobs in real volume. Markets rallied anyway, betting the Fed will be forced to act sooner rather than later. It's a report that looks fine on the surface and worse the closer you look.

A Labour Market Running On Fumes

Nicole Bachaud, a labour economist at ZipRecruiter, pointed to price volatility as a factor keeping employers hesitant to add headcount even as job openings hold near multi-year lows. Layoffs are still rare too, and that leaves us with a market where people who already have jobs are safe, but anyone searching for a new one is running out of options.

Where This Leaves The Fed

Traders are now leaning harder toward a rate cut later this year, with odds on a near-term hike falling sharply the moment the report hit. Whether that's the right read depends on whether August's data confirms a real slowdown or this was just a rough month.

Read the full story here

Between a surprise US payroll loss and a falling but arguably artificial unemployment rate, this week's jobs data left a lot of room for interpretation. I'm curious to learn what our community thinks happens from here. Please vote on this week's question:

LAST WEEK’S POLL RESULTS

In last week's poll, I asked which company readers expected to be more valuable a year from now, Apple or Nvidia. In a very close contest, Nvidia edged it out with 54% of the vote, so I guess there’s still a lot of confidence remaining in its AI-driven growth story even after such a massive run already. Thanks to everyone who voted.

READER COMMENTS

Nvidia

"Nivida keeps innovating and apple relies on it's products." — storierod

Apple

"I own both, which makes this a a fun question for me Marc...

I'm going with Apple, but it wasn't the easy answer I expected when first reading your question. I'm far more confident in Apple over Nvidia very long term, but looking out just a year gave me pause. Jensen's seemingly got the world on a string right now, so I don't think his magic is quite through. I still went with Apple tho'.

FWIW... This doesn't mean I'm 'bullish' Apple right now." — callawayguy

"Especially with the new CEO of Apple which is a product guy I think Apple will have a boom. Additionally Nvidia has those circular financing going on and an investing scheme that I don’t think will hold up long term. Apple has a more solid foundation than Nvidia for long term growth." — angellodarko

CYBER SECURITY

CRA Hack Victims Can Now Claim Payouts

• Claims process opened for 2020 CRA data breach

• Settlement totals 8.7 million dollars for affected Canadians

• Most serious cases eligible for up to 5,000 dollars

• Deadline to file a claim is February 3, 2027

Our Canadian readers may remember that way back in 2020, hackers broke into thousands of Canadians' accounts on government websites, including the CRA portal, mostly to file fraudulent pandemic benefit claims in other people's names. Six years later, the class action stemming from that breach has finally reached the payout stage, and it’s open to anyone whose information was accessed or misused that summer. Sadly, this is a reminder of just how long these legal processes can drag on, and how much personal information sits behind logins that turn out to be less secure than anyone assumed.

Who Actually Qualifies Here

Eligibility hinges on timing. Only people whose accounts were accessed between June 15 and August 13, 2020, and whose information was used fraudulently or exposed, qualify for the largest payments, while others may still be eligible for smaller amounts tied to time spent resolving the mess.

What Happens To Leftover Money

If claims don't use up the full settlement, Ottawa has agreed to send what's left to the Privacy and Access Council of Canada to fund further research. Given how common data breaches have become, that leftover money alone could end up mattering more than any individual payout.

Full story here.

THE INFLUENCER WARS
OpenAI's Influencer Trip Sparks Online Backlash

• OpenAI flew influencers to a Hudson Valley resort

• Trip aimed to promote new ChatGPT Work tools

• Commenters accused creators of selling out to AI

• Backlash reflects growing public unease about AI companies

This story cracks me up. A weekend getaway meant to generate good buzz for OpenAI's newest workplace tools has instead become a lesson in how fast influencer marketing can backfire. Attendees who posted glowing recaps of their time away got hit with strong criticism from followers uncomfortable with the optics of cozying up to a company facing scrutiny over everything from its environmental footprint to its government contracts. Some creators pushed back, and argue that the outrage was hypocritical given how dependent everyone already is on the same tech platforms. Either way, the honeymoon phase between influencers and AI companies seems to be over.

The Trust Problem Is Real

Experts say the backlash says less about any one trip and more about a creator economy still figuring out where it stands on AI. Polling shows a majority of Canadians and Americans want AI heavily regulated, so that makes any cozy brand partnership with an AI company a harder sell than it was just a short while ago.

Why This Keeps Happening

In defense of OpenAI, it isn't the only company learning this lesson, and it won't be the last, especially as more AI firms lean on creator marketing to build trust with skeptical audiences. No doubt we can expect more of these clashes as the gap between public wariness and everyday AI use keeps widening.

Learn more here.

HOUSING
Housing Market Splits Between Luxury And Starter Homes

• Starter home sales fell 5.4 percent from last year

• Luxury home sales rose 6.2 percent over same period

• Typical starter home now costs around 202,000 dollars nationally

• Average 30-year mortgage rate sits near 6.75 percent

As I’ve covered here in The Pulse and on my YouTube channel, the US housing market is splitting in two, and it's not hard to see why. (For the record, it’s the same here in Canada.) Buyers at the lower end of the market technically have more homes to choose from and more room to negotiate, but many simply can't afford to buy at today's prices and rates. Buyers at the top of the market care much less about mortgage rates, since many can lean on stock portfolios or other assets instead of financing. It's the same K-shaped divide showing up across pockets of the economy this year, just focused on real estate in this instance.

Why Lower Rates Would Change Everything

Redfin's Daryl Fairweather says a drop to even 5% mortgage rates would unlock buying and selling almost instantly, but she doesn't see that happening anytime soon. Until rates actually come down, starter home buyers are stuck watching prices climb even as their own affordability keeps shrinking.

New Legislation Isn’t a Quick Fix

A new housing law aims to boost construction and rein in institutional buyers, but with a shortage north of 4 million homes, relief is still years away.

Full story here.

GOVERNMENT OVERSIGHT
Watchdog Finds Doge Overstated Its Savings Claims

• GAO reviewed Doge claims of 110 billion saved

• Most savings lacked verifiable supporting documentation or methodology

• 108 of 264 lease terminations were already planned

• One claimed 1.7 billion dollar contract was never cancelled

At the start of Trump’s second term, there was a lot of hoopla over DOGE, the Department of Government Efficiency, cutting government waste, but a new watchdog report finds the receipts don't quite add up. The Government Accountability Office found that the agency couldn't verify how it calculated the vast majority of its reported savings, and some of the specific claims it made simply weren't true. It's a familiar pattern for any organization that moves fast and touts big numbers before the paperwork catches up, except this time we’re talking about taxpayer money.

The Musk Era Promises Fell Short

Elon Musk originally floated savings as high as 2 trillion dollars a year before later scaling that back considerably. Even by Doge's own generous accounting, the final total landed nowhere close to that original pitch.

The Political Fight Isn't Over

Democratic senators who requested the audit say the findings confirm Doge was more about optics than results, while the White House points to ethics training and disclosure rules already in place. Expect this report to become a talking point well beyond Doge's official shutdown on July 4.

Full story here.

The Relative Strength Indicator (RSI) can provide a signal that suggests a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

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