CA: Labour Force Survey

Fri Oct 09 07:30:00 CDT 2015

Consensus Actual Previous
Employment 5,000 12,100 12,000
Unemployment 7.0% 7.1% 7.0%

September's labour force data were mixed. On the positive side, employment followed August's 12,000 gain with an almost identical, and slightly stronger than expected, 12,100 advance. However, with the participation rate steady at 65.9 percent, this was still soft enough to see the unemployment edge up a tick to 7.1 percent, equalling its highest mark since December 2013.

Also on the negative side, September's increase in jobs was wholly attributable to a 74,000 jump in part-time positions as full-time employment was down some 61,900, its steepest decline since October 2011. That said, at least the private sector made a positive contribution (10,100) and this combined with a 30,800 bounce in the number of self-employed more than offset a 28,800 slide in public sector hiring.

In contrast to August's report, both the goods producing and service sectors added to headcount. The former rose a modest 3,400 with manufacturing just 600 better off and construction up 6,800. Agriculture also increased 3,000 but utilities fell 4,300 and natural resources 2,600.

Service sector employment was 8,700 stronger led by information, culture and recreation (32,500) ahead of other services (21,600), health care and social assistance (16,800) and business, building and other support services (16,000). However, trade was down 8,900 and transportation and warehousing 7,800. Education shed fully 51,300 positions and accommodation and food 5,100.

Today's survey makes for a third quarter rise in overall employment of 30,700, down only slightly from the second quarter's 32,800 increase when GDP contracted 0.3 percent versus January-March. However, growth then was undermined by a particularly large drop in productivity which is unlikely to have been repeated last quarter. As such the economy probably expanded at a subdued pace in July-September; likely fast enough to keep BoC policy on hold for now but also slow enough to ensure that another cut in interest rates is still a possibility further out.

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.