CA: Labour Force Survey

Fri Jul 10 07:30:00 CDT 2015

Consensus Actual Previous
Employment -5,000 -6,400 58,900
Unemployment 6.9% 6.8% 6.8%

Having seen May produce the sharpest rise since last October, employment fell only a slightly steeper than expected 6,400 in June. The decline maintained the switchback monthly profile that began at the start of the year but, with the participation rate a tick lower at 64.8 percent, left the unemployment rate unchanged at a lower than anticipated 6.8 percent.

In fact, June's drop in headcount masked widely divergent developments in full-time and part-time positions. Hence, while the former saw a 64,800 surge the latter slumped some 71,200. Similarly, a 42,200 gain in public sector net hiring contrasted with a 26,300 reversal in the private sector and a 22,000 drop in the number of self-employed.

Employment was down just 1,900 in the goods producing sector although within this manufacturing shed 7,200. Construction recorded an 8,000 increase and natural resources were up 3,500 but utilities dipped 1,600 and agriculture was off 4,600.

Meantime, services lost a net 4,500 workers, mainly reflecting a near-17,000 drop in other services and a 13,700 slide in business, building and other support services. Partial offsets were provided in public administration (9,500), transportation and warehousing (7,500) and professional, scientific and technical services (6,900).

Ahead of next week's BoC policy announcement today's data will probably boost speculation about another 25 basis point cut in the target overnight rate. Although the composition of the June report is decidedly mixed if anything the risk of recession last quarter is now a little higher. That said, another monetary ease is far from a done deal as January's 25 basis point cut was supposedly a pre-emptive move. This may might mean that further signs of weakness are required before the January move is deemed insufficient.

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.