Canada's labour market continued to exhibit surprising strength in March, when the economy added 34,700 jobs, topping Econoday's consensus of 10,000. The unemployment rate remained steady at 5.0 percent, below expectations of 5.1 percent. The participation rate edged down to 65.6 percent from 65.7 percent.

Despite stronger-than-anticipated employment gains, year-over-year average hourly wage growth slowed to 5.3 percent from 5.4 percent, a welcome development for the Bank of Canada. Total hours worked rose 0.4 percent on the month and 1.6 percent from a year earlier.

Employment increased for both full-time and part-time positions, by 18,800 and 15,900, respectively, and was concentrated in private sector services.

Overall, the private sector added 34,800 positions, while public sector employment was up just 3,200 and self-employment declined 3,300. The number of employees was up 37,900.

A 75,500 gain in services more than offset a 40,900 drop in goods-producing industries, where declines were widespread, including an 18,800 drop in construction, a 10,600 decrease in natural resources and a 6,100 contraction in manufacturing.

Within services, employment increased 40,600 in transportation and warehousing, 30,500 in business, building and other support services the first monthly advance since November 2021 and the highest level since February 2020 and 18,500 in finance, insurance, real estate, rental and leasing, together totaling 89,600 jobs. Health care and social assistance posted the largest decline of 12,800.

Regionally, employment increased in four provinces in March: Ontario, Manitoba, Alberta and Prince Edward Island.

Owing to a 150,000 surge in January, employment in the first quarter was up 206,500, following a 164,200 increase in the fourth quarter 2022. Over the past 12 months, the average monthly gain has been 35,460.

According to the latest Bank of Canada Business Outlook Survey published April 3, firms still report tight labour market conditions and mostly expect to increase their workforce over the next 12 months. However, they also pointed out that labour shortages and wage growth pressures have eased, which today's report confirms.

On the consumer side, the central bank's Canadian Survey of Consumer Expectations reflected uncertainty among Canadians about the path forward for the economy and the labour market, although they too see the job market as"strong" and feel confident they can find new work should they decide. Still,"most workers do not see their wages catching up with recent inflation over the next year," the report said.

Following today's data, Econoday Consensus Divergence Index is at 30, indicative of an economy that is appreciably stronger than expected, which is consistent with some tightening risk building up.

Employment in March is expected to rise 10,000 versus February's 21,800 gain and January's giant 150,000 surge. March's unemployment rate is expected to rise 1 tenth to 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.