| Consensus | Actual | Previous | |
|---|---|---|---|
| Employment - M/M | 12,000 | 39,900 | -6,400 |
| Unemployment Rate | 5.6% | 5.5% | 5.5% |
Highlights
Just as the Bank of Canada is pointing out signs that tightness in the labour market is easing, Statistics Canada reports a stunning 39,900 increase in employment in August, far more than Econoday's consensus of 12,000, and following a 6,400 drop in July. The unemployment rate remained unchanged at 5.5 percent after three months of increases, below the consensus estimate of 5.6 percent.
On the bright side, the average 12-month hourly wage growth slowed to 4.9 percent in August from 5.0 percent in July.
Total hours worked were up 0.5 percent in August and by 2.6 percent on a year-over-year basis.
Employment gains were driven by a 32,200 increase in full-time position, while part-time was up 7,800.
In its September 6 policy statement, the Bank of Canada noted that conditions in the labour market continued to ease, although it stressed that wage growth remained between 4 and 5 percent. Going forward, the central bank expects wage growth to slow.
While today's headline number was surprisingly strong, details showed all was not rosy, starting with a participation rate that dipped to 65.5 percent from 65.6 percent.
The private sector shed 22,700 jobs while the public sector added 13,200. Self-employment, which is not considered as much as full-time employment to be a sign of a healthy job market, surged 49,500. The number of employees dropped 9,600.
Looking at the sector breakdown, August employment came from services, which were up 42,400, while goods-producing industries fell 2,500, led by a 29,500 plunge in manufacturing and a 10,500 drop in agriculture, partly offset by a 33,800 advance in construction.
Within services, a few sectors stood out: professional, scientific and technical services soared 52,100, and"other services" were up 20,900. Meanwhile, educational services plunged 44,200, and finance, insurance, real estate, rental and leasing fell 16,300.
With today's report, Econoday's Consensus Divergence Index is at 36, consistent with an economy that is performing appreciably stronger than expected, which will leave the BoC wanting more proof it was it right to leave rates unchanged in September.
On the bright side, the average 12-month hourly wage growth slowed to 4.9 percent in August from 5.0 percent in July.
Total hours worked were up 0.5 percent in August and by 2.6 percent on a year-over-year basis.
Employment gains were driven by a 32,200 increase in full-time position, while part-time was up 7,800.
In its September 6 policy statement, the Bank of Canada noted that conditions in the labour market continued to ease, although it stressed that wage growth remained between 4 and 5 percent. Going forward, the central bank expects wage growth to slow.
While today's headline number was surprisingly strong, details showed all was not rosy, starting with a participation rate that dipped to 65.5 percent from 65.6 percent.
The private sector shed 22,700 jobs while the public sector added 13,200. Self-employment, which is not considered as much as full-time employment to be a sign of a healthy job market, surged 49,500. The number of employees dropped 9,600.
Looking at the sector breakdown, August employment came from services, which were up 42,400, while goods-producing industries fell 2,500, led by a 29,500 plunge in manufacturing and a 10,500 drop in agriculture, partly offset by a 33,800 advance in construction.
Within services, a few sectors stood out: professional, scientific and technical services soared 52,100, and"other services" were up 20,900. Meanwhile, educational services plunged 44,200, and finance, insurance, real estate, rental and leasing fell 16,300.
With today's report, Econoday's Consensus Divergence Index is at 36, consistent with an economy that is performing appreciably stronger than expected, which will leave the BoC wanting more proof it was it right to leave rates unchanged in September.
Market Consensus Before Announcement
Employment in August is expected to rise 12,000 versus July's unexpected decline of 6,400 that, however, followed June's sharp 59,000 jump. August's unemployment rate is expected to edge 1 tenth higher to 5.6 percent.
Definition
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.
Description
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.
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.
