CA: Labour Force Survey

Fri Apr 10 07:30:00 CDT 2015

Consensus Actual Previous
Employment 0 28,700 -1,000
Unemployment 6.8% 6.8% 6.8%

Canadian labour markets rebounded well in March. A 28,700 increase in overall employment was significantly stronger than expected although with the participation rate advancing 0.1 percentage point to 65.9 percent, the jobless rate only held steady at 6.8 percent.

That said, the headline increase in jobs was wholly attributable to part-time positions which climbed fully 56,800. Disappointingly, full-time headcount dropped 28,200. The public sector created a net 26,500 new jobs while the private sector was up a more modest 19,300. The number of self-employed declined 17,000.

At a sector level, a 45,300 jump in service sector positions contrasted sharply with a 16,500 decline in the goods producing area. Within the latter, manufacturing was down 2,400, construction 12,100 and agriculture was off 6,100. The only increase was recorded in natural resources (6,300).

The expansion in headcount in services was dominated by a 19,800 rise in trade and a 15,900 advance in transportation and warehousing. Educational services (12,100) and finance, insurance, real-estate and leasing (7,700) also enjoyed a good month. On the downside, the steepest reversal was in public administration (11,300) ahead of business, building and other support services (4,900) and professional, scientific and technical services (4,000).

Today's mixed labour force survey results are unlikely to impress the BoC. Although overall employment was up 63,100 in the first quarter, almost double the previous period's gain, the absence of new full-time posts suggests that the headline figures are misleadingly strong. The BoC may not be in any rush to cut official interest rates again but for now the central bank's bias should remain firmly on the dovish side.

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.