Canada's labour market once again defied expectations by adding 41,400 positions in April, more than twice as much as Econoday's consensus of 17,500. The unemployment rate remained steady at 5.0 percent, below the 5.1 percent consensus. It has been unchanged since December 2022, close to its record low of 4.9 percent. The participation rate was also unchanged at 65.6 percent.

Underneath the surface, however, the picture was not as robust, as job gains were all part-time (47,600), while the economy shed 6,200 full-time positions considered more stable. With a 19,100 increase, self-employment was also a driver, with the remaining gains coming mostly from the public sector (13,300), while the private sector contributed the least (9,200).

Looking at the industry breakdown, services added 35,200 jobs, while goods-producing industries added 6,300 positions, led by construction (7,000), manufacturing (2,800) and natural resources (1,800). Meanwhile, agriculture and utilities cut a cumulative 5,300 jobs. Within services, four sectors created 71,500 positions, led by a 24,400 increase in wholesale and retail trade. Transportation and warehousing added 16,500 jobs, information, culture and recreation 16,100, and educational services 14,500. The largest cuts came from business, building and other support services, where employment was down 14,000, followed by finance, insurance, real estate, rental and leasing, down 8,800, and professional, scientific and technical services, down 6,100.

Average hourly wage gains were still robust at 5.2 percent year-over-year.

Today's data will keep the Bank of Canada vigilant, although Econoday Consensus Divergence Index is at 9, signaling limited tightening risk.

In its minutes from the April 12 meeting, the Bank of Canada noted signs of a rebalancing between supply and demand in the domestic economy but still stressed that conditions remained tight in the labour market and that a growth slowdown would materialize"a little later". It pointed to high job vacancies, robust hiring, a near record low unemployment rate and wage growth between 4 and 5 percent. However, fast population growth boosted by immigration could allow employment growth to be stronger than historical averages without causing further labor market tightness.

Employment in April is expected to rise 17,500 versus March's stronger-than-expected 34,700. April'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.