CA: Labour Force Survey

Fri Nov 06 07:30:00 CST 2015

Consensus Actual Previous
Employment -2,500 44,400 12,100
Unemployment 7.1% 7.0% 7.1%

The labour market more than comfortably outperformed expectations in October. After a surprisingly firm, if distinctly lopsided, 12,100 increase in September, employment surged fully 44,400 at the start of the current quarter. Moreover, despite a tick higher in the participation rate to 66.0 percent, its strongest reading since July 2014, the jobless rate still reversed the previous month's rise to dip to 7.0 percent.

The overall jump in employment was primarily due to strength in part-time jobs which followed September's 74,000 leap with a 35,400 advance this time. Even so, full-time positions were up a handy 9,000. There was also a more than healthy 41,300 bounce in private sector payrolls, complemented by a 30,500 gain in public sector headcount. A partial offset was provided by the number of self-employed which was down 27,300.

At a sector level the headline gain was wholly attributable to services where employment increased fully 58,800. Within this, public administration added a sizeable 32,000 but trade was up 17,600, accommodation and food 12,900 and health care and social assistance 7,500. Falls were relatively mild and limited to information, culture and recreation (5,200), education (3,600) and business, building and other support services (2,100).

Meantime, goods production laid off a net 14,400 despite a decent 6,500 increase in manufacturing. Construction (minus 9,400) and natural resources (minus 8,000) did most of the damage here.

Today's report suggests that the Canadian economy began the current quarter on a generally solid footing. October's bounce in employment compares very favourably with an average rise of 10,200 last quarter. The BoC's latest forecast was for GDP growth to slow from an estimated 2.5 percent (saar) in July-September to just 1.5 percent this quarter but October's labour market data suggest that this might be too conservative. In any event, the chances of any additional rate cuts have been dented significantly.

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.