CA: Labour Force Survey

Fri Feb 06 07:30:00 CST 2015

Consensus Actual Previous Revised
Employment 5,000 35,400 -4,300 -11,300
Unemployment 6.7% 6.6% 6.6% 6.7%

The labour market began 2015 on an unexpectedly positive note. Following a steeper revised 11,300 drop in December employment rose a solid 35,400, its best performance since October. Moreover, with the participation rate unchanged at 65.7 percent, the jobless rate dipped a tick to 6.6 percent to match the recent low seen in the same month.

However, the headline improvement masked a 3,000 decline in full-time jobs and reflected instead a near-10,000 advance in part-time positions. Indeed, with private sector payrolls up just 1,100 and the public sector down 6,700, the overall rise in employment was wholly attributable to a 41,100 jump in the number of self-employed.

Goods producing industries created 9,700 net new positions within which manufacturing was up 10,700 and construction 4,700. Agriculture edged 1,500 higher as did utilities but natural resources fell 8,800.

Meantime services gained 25,700, dominated by professional, scientific and technical services (22,400) ahead of health care and social assistance (7,800) and educational services (6,100). On the downside there were relatively modest decreases in public administration (8,300), transportation and warehousing (5,900) and trade (4,200).

Today's report follows a suite of revisions made by Statistics Canada last week that left a significantly weaker picture of the labour market in 2014. Cumulatively, employment rose 121,300, the smallest increase since 2009 and more than 64,000 less than previously thought. December's participation rate (65.7 percent) was the lowest since 2000.

Against this backdrop it is all the less surprising that the BoC felt obliged to cut official interest rates in January. To this end, the mixed composition of these latest statistics will do nothing to undermine the central bank's clearly dovish bias and leave another 25 basis point ease in March firmly on the table.

The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labor force.

As in the U.S., this report is used as an indicator of the health of the domestic economy. Employment trends and break-downs by industry groups highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.

The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.

The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.