Following its stellar performance in September there was always going to be downside risk to the labour force survey in October. However, as it turned out, employment again surprised on the upside with a chunky rise of some 43,900. This would probably have been enough to take the unemployment rate below 7 percent but with the participation rate edging another tick higher to 65.8 percent, it held steady at September's mark.
The latest jump in jobs reflected wholly a 67,100 spurt in part-time positions as full-time posts were down 23,100. However, at least the bulk of the rise was in the private sector (34,000). The public sector was up 9,800 while the number of self-employed was essentially flat.
Goods producing industries added 20,700 to their headcount although within this manufacturing shed 7,500. Rather, the improvement here was due to construction (23,800) and natural resources (10,200).
At the same time service sector employment rose 23,400, in large part on the back of trade (18,800), education (15,800) and other services (17,800). The only decline of any size was in business, building and other support services (15,000) although accommodation and food (minus 9,800) also had a poor month.
Taking September and October together, employment rose an impressive average 55,500. This compares with a mean increase of just 5000 in the previous eight months and suggests that the economy ought to be on a solid recovery path. However, fourth quarter growth is still likely to see a potentially significant slowdown after what was probably a sizeable bounce-back in July-September. The underlying picture looks better than it did a short while ago but the outlook remains somewhat clouded.
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.