CA: Labour Force Survey

Fri Dec 04 07:30:00 CST 2015

Consensus Actual Previous
Employment -7,000 -35,700 44,400
Unemployment 7.0% 7.1% 7.0%

Following a surprisingly robust gain in October, employment in November saw its first decline since June. In fact, a 35,700 drop was significantly steeper than market expectations and, despite a 0.2 percentage point fall in the participation rate to 65.8 percent, enough to nudge the jobless rate a tick higher to 7.1 percent.

November's headline slide was wholly attributable to a 72,300 slump in part-time positions as full-time jobs rose a very respectable 36,600. However, private sector payrolls were down fully 40,800 and the public sector shed a further 35,700. Consequently, the overall picture would have looked a good deal worse but for a 26,300 gain in the number of self-employed.

At a sector level weakness was concentrated in services where employment nosedived some 82,000, reflecting mainly a 32,500 shakeout in public administration but also broad-based decline elsewhere. Hence, trade was off 15,600, transportation and warehousing 11,200 and information, culture and recreation 11,900. Accommodation and food was down 9.800 and other services 7,800. The only offsets of any size were in education (6,000) and professional, scientific and technical services (17,800).

By contrast goods producing industries added fully 46,300 to their headcount within which manufacturing advanced a healthy 17,400. Construction was up 15,300 and agriculture 15,000.

Wednesday's BoC policy announcement indicated a central bank that was cautiously content with the way in which the economic recovery is unfolding. However, having seen GDP contract some 0.5 percent in September, today's decidedly lopsided, but still fundamentally weak, employment update increases the risk that the Bank's 1.5 percent (saar) fourth quarter forecast could be undershot. Policy may be on hold for some time but there are still not insignificant risks of additional monetary accommodation.

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.