Canada's employment growth continues to rebound faster than expected, rising by 76,000 or an encouraging 0.4 percent in January from December, above expectations in Econoday's survey of forecasters for a 25,000 gain. The unemployment rate dipped to 6.6 percent in January from 6.7 percent in December. Forecasters looked for unemployment to rise to 6.8 percent in January.

The fall in the unemployment rate is the second straight monthly decline after recently peaking at 6.9 percent in November 2024. The unemployment rate is still up 0.9 percentage points compared to January 2024.

The participation rate was 65.5 percent in January, vs. 65.4 percent in December and November. The participation rate is down 0.1 percentage points compared to a year ago.

Total hours worked rose 0.9 percent in January but are up 2.2 percent from a year ago. Average hourly wages are up 3.5 percent year-over-year after the annual growth rate was +4 percent in December, and up 4.2 percent in November. This is the slowest pace of growth since April 2022.

For January, employment gains were led by manufacturing (+33,000; +1.8 percent) and professional, scientific and technical services (+22,000; +1.1 percent).

Private sector jobs rose by 57,000 in January after an increase of 39,000 in December and a mere 6,300 rise in November. Public sector employment contracted by 8,400 following December's increase of 40,400, and +45,000 in November. Self-employment increased by 27,000, after growing by 23,700 in December.

After a surprising 98,000 rise in December, a more moderate 25,000 increase is the call for January, while the jobless rate ticks up to 6.8 percent from 6.7 percent at year end.

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.