CA: Labour Force Survey

January 6, 2017 07:30 CST

Consensus Actual Previous
Employment -5,100 53,700 10,700
Unemployment 6.9% 6.9% 6.8%

December employment surprised jumped 53,700 expectations were for a decline of 5,100. This was the fifth month of solid employment growth. At the same time, the unemployment rate increased to 6.9 percent from 6.8 percent as more people participated in the labour market. The participation rate increased to 65.8 percent from 65.6 percent in November. The number of self-employed declined 18,400. Public employment increased 28,600 while private employment increased 43,500.

In the fourth quarter of 2016, employment increased 108,000, the largest increase since the second quarter of 2010. This followed a gain of 62,000 in the third quarter. In the 12 months to December, employment gains totaled 214,000.

The number of private sector employees rose 44,000 while the number of public sector employees increased by 29,000. At the same time, self-employment was little changed. Employment increased by 28,100 in professional, scientific and technical services and by 13,900 in health care and social assistance. In contrast, employment declined by 6,800 in agriculture.

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.