Just took a look at today’s release on employment data from Statistics Canada and was underwhelmed by the data.  Looks like Canadian employment is rising, but not really rising all that fast.

You might be saying ‘what data?” since the release I am referring to is the somewhat-overlooked Survey of Employment, Payrolls and Hours (SEPH), not the  better known Labour Force Survey  (the LFS is the one that comes out the first Friday of the month, and grabs all the headlines).  SEPH is a survey of employers: its data is collected from companies who have employees on the payroll. The LFS is a household survey, and hence subject to a bit more interpretation.  If you phone someone at home and ask them if they have a job, they could say ‘yes’ even if they are self-employed and have nothing to speak of in terms of revenues.  (In the U.S., by the way, the employment figures that are reported actually come from two different surveys. The unemployment rate comes from the household survey, while the change in employment (typically the big market-mover) comes from the non-farm payrolls survey).

So let’s get back to what the Canadian numbers show.

The Labour Force Survey has shown staggering employment growth in recent months: in March and April, job growth totalled 140,000 (another 7,700 jobs were added in May).  Taking a longer view, year to date between January and April, total jobs were up by 138,000 or about 0.8 percent.  In contrast, over the same period the SEPH survey shows a gain or just 0.4 percent or 55,000 jobs.  It is a significant divergence.

So which is correct? Over time, the two surveys do tend to move together, and they probably will this time too. Question is, which trend will be the one at which they converge?

It is the surge in jobs presented by the Laobur Force Survey which has prompted the expectation of Canadian rate interest rate hikes. Yes, those are being put on hold until Europe gets their act together and the U.S. stabilizes but they are still on the table.  Then again, if the employment picture is a little less bright than it looks, maybe they are going to be on hold a very long time.  That is going to have implications for the bond markets, and for the Canadian dollar.

So let’s wait and see.  The Canadian Labour Force Survey for June will be released next Friday. We are going into a rocky period for the global economy, and it may well be that the it is the payrolls report that has been the leading indicator of what that means for Canada.