CA: Labour Force Survey

Fri May 11 07:30:00 CDT 2018

Consensus Actual Previous
Employment 16,000 -1,100 32,300
Unemployment 5.8% 5.8% 5.8%

April employment surprised and slipped 1,100 expectations were for an increase of 16,000. The decline was entirely due to a drop in part time employment. Full time jobs increased 28,800 while part time jobs dropped 30,000. The participation rate slipped to 65.4 percent from 65.5 percent in March. The last time the participation rate was last this low was in November 1999 and the last time it was even lower was October 1998 (65.2 percent). Goods sector jobs were down 15,900 while services added 14,800. The private sector created 28,000 jobs but the public sector lost 13,600.

More people worked in professional, scientific and technical services, as well as in accommodation and food services. In contrast, employment declined in wholesale and retail trade and in construction. The number of people employed in accommodation and food services increased 17,000. In wholesale and retail trade, employment fell 22,000. Employment in the industry rose steadily from October 2016 to September 2017, but has been trending down since the start of 2018. Employment in construction was down 19,000 in April, offsetting the gain in March.

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.