The Canadian economy added 40,700 jobs in February, more than twice as much as expected by forecasters in an Econoday survey, and the largest increase since September 2023. The unemployment rate still edged up to 5.8 percent from 5.7 percent in January, as expected, with a steady participation rate of 65.3 percent.

While the unadjusted average hourly wage growth slowed to 5.0 percent year-over-year from 5.3 percent in January, it is still a pace that might be too uncomfortable for the Bank of Canada to rush into any rate cut. In fact, with today's report, Econoday's Relative Performance Index at minus 6 points to a limited easing risk.

The economy has been consistently creating jobs since August 2023, for a cumulative seven-month increase of 234,800. Hours worked edged up 0.3 percent on the month, for a 12-month increase of 1.3 percent.

February's gains were concentrated in full-time positions, up 70,600, the largest increase since June 2023. Part-time employment was down 29,900, the largest decrease since June 2023 and partly erasing January's 48,900 advance.

The number of employees rose just 2,500, as an 18,800 increase in the public sector was mostly offset by a 16,400 decline in the private sector. Self-employment was up 38,300.

Employment increased 46,900 in services but was down 6,300 in goods-producing industries, led by a 13,900 drop in manufacturing, while construction increased 10,500. Agriculture contributed to the weakness with 6,000 jobs lost over the month.

Within services, accommodation and food increased 26,200, professional, scientific and technical services rose 17,900,"other services" were up 10,800 and public administration 8,800. The largest drops were in educational services, wholesale and retail trade, and business, building and other support services, which all recorded double-digit declines totaling 47,000.

Employment in February is expected to rise 20,000 versus January's 37,300 climb that was well above Econoday's 14,500 consensus. February's unemployment rate is expected to edge higher to 5.8 percent versus January's 5.7 percent that was 2 tenths tighter than the consensus.

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.