CA: Labour Force Survey

Fri May 08 07:30:00 CDT 2015

Consensus Actual Previous
Employment -5,000 -19,700 28,700
Unemployment 6.9% 6.8% 6.8%

May's labour force survey was mixed. On the negative side employment followed March's surprisingly sharp 28,700 increase with a steeper than expected 19,700 retracement. However, with the participation rate dipping a tick to 65.8 percent the decline was not enough to budge the unemployment rate from the previous period's 6.8 percent.

There was an equally mixed composition to the headline fall. Hence, while part-time positions contracted some 66,500, full-time headcount rose a solid 46,900. Similarly a more than respectable 24,200 advance in private sector jobs contrasted with both a 19,900 slide in public sector workers and a 24,100 decrease in the number of self-employed.

Much of the overall fall was concentrated in the goods producing sector which shrank 15,500. However, the drop here was more than accounted for by a 28,400 reversal in construction and masked a 10,400 gain in manufacturing. The other subsectors were broadly stable.

Meantime, employment in services dipped just 4,200 although this masked sizeable falls in both trade (20,500) and information, culture and recreation (9,800). Support was provided mainly by an 11,000 increase in business, building and other support services together with smaller rises in other services (5,500), transportation and warehousing (5,400) and accommodation and food (3,600).

April's drop in employment compares with a 21,000 average increase in the first quarter where all the signs are that economic growth slowed sharply. Accordingly, it looks as if total output got off to a relatively soft start this quarter. That said, with private sector payrolls up strongly and manufacturing posting a solid increase, today's report is certainly not all bad. Still, the BoC's April MPR forecast of 1.8 percent (saar) GDP growth this quarter could yet prove a little optimistic. In any event, the central bank is very unlikely to be rushed into any near-term change in official interest rates.

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.