Employment far outpaced expectations in December, when Canada's economy added 104,000 jobs, more than 20 times the 5,000 consensus forecast in an Econoday survey. The unemployment rate edged down to 5.0 percent in December from 5.1 percent in November, while the consensus was for an increase to 5.2 percent. The participation rate moved up to 65.0 percent from 64.8 percent.

In December, the average hourly wages of employees rose 5.1 percent year-over-year, remaining above 5 percent for a seventh consecutive month. Total hours worked were little changed on the month and up 1.4 percent from December 2021.

Employment increased across six provinces, with job creation led by an 84,500 gain in full-time positions, while part-time employment increased 19,500. The private sector accounted for all the gains, with 111,500 positions created on net, while the public sector shed 18,400 positions. Self-employment increased 10,800.

Looking at sectors, employment was up 81,700 in services and 22,200 in goods-producing industries. Within services, transportation and warehousing was up 29,300, information, culture and recreation 25,000 and professional, scientific and technical services 23,100, together accounting for over 77,000 jobs. The largest drop was in health care and social assistance, which lost 17,400 jobs, one of three services sectors to shed jobs. Within goods-producing industries, a 35,000 jump in construction explained the overall gain, while most other categories lost jobs, including a 7,800 drop in manufacturing.

Today's data will likely reinforce the Bank of Canada's resolve to bring inflation down: employment in the fourth quarter totaled 222,400, the strongest quarter in 2022, for an annual increase of 394,100.

Econoday's consensus divergence is now at plus 27 to indicate that the Canadian economy has been appreciably stronger than expected.

Employment in December is expected to rise 5,000 versus November's 10,100. December's unemployment rate is expected to rise 1 tenth to 5.2 percent from 5.1 percent.

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.