CA: Labour Force Survey

Fri Mar 13 07:30:00 CDT 2015

Consensus Actual Previous
Employment -5,000 -1,000 35,400
Unemployment 6.7% 6.8% 6.6%

The volatile monthly employment profile continued in February as January's surprisingly sharp 35,400 jump was followed a slightly smaller than expected 1,000 decline. However, combined with a tick up in the participation rate to 65.8 percent, the minimal decline in jobs was still enough to lift the jobless rate 0.2 percentage points to 6.8 percent, its highest mark since last September.

The dip in headline employment was wholly attributable to 34,900 slump in part-time positions as full-time jobs climbed 34,000. However, private sector headcount was down 29,000 leaving a 24,300 increase in the public sector and a 3.600 gain in the number of self-employed to limit the overall decline.

There was a similarly sharp contrast between goods producing and service sector industries. The former saw a 24,100 drop, largely due to a near-20,000 fall in manufacturing. Natural resources (minus 16,900), agriculture (minus 1,600) and utilities (minus 1,100) were also weak but construction (15,500) had a good month.

Meantime, services recorded a 23,200 increase, built upon a 15,400 advance in education and a 12,400 rise in trade. Health care and social assistance (9,700) and accommodation and food services (5,200) similarly added to headcount. Even so, there were decreases in information, culture and recreation (12,400) and the other services category (11,500). Elsewhere monthly changes were only small.

Today's soft survey results are consistent with other indications of slowing economic activity this quarter. This will come as no big surprise to the BoC whose latest MPR forecasts put real GDP growth at 1.5 percent (saar) in both the current and next quarters after a 2.4 percent rate in the October-December period. That said, the central bank is clearly willing to respond quickly to weak data and an extended run of sub-par growth or even a surprise and sustained bounce in the C$ could well prompt another cut at some point.

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.