Data daze

Business economists like to tell clients that you shouldn't read too much into one monthly data point, but it's advice that they don't always follow themselves. Case in point: last week the US reported that employment rose by only 142,000 in September, significantly lower than expected. Just one reading, right?  No reason to panic. Yet a large majority of economists quoted by the media immediately said that the report was a clear indication that economic problems abroad, notably the slowdown in China, were starting to weigh on US exports. Market participants, many of whom had been expecting a rate hike in September, promptly priced out any likelihood of a Fed rate hike in this calendar year.

So what do we make of today's Canadian employment data, also for the month of September?  Headline number of jobs created: 12,000 -- moderately positive. However, behind that number there was a reported 62,000 loss of full-time jobs, against a 74,000 gain in part-time employment, so it can be argued that the total labour input into the economy actually fell slightly. In addition, the unemployment rate edged up to 7.1 percent -- moderately negative.  However, with the number of jobs increasing, this was attributable entirely to a rise in number of people seeking work, which is generally taken as a sign of worker confidence.

There are plenty of conclusions we can draw from this report. One is that Canada's labour force survey still seems to suffer from wonky methodology.  I've written here before about the wild gyrations that are reported for full-time versus part-time employment, or paid employment versus self -employment, that StatsCan reports almost every month, only to revise away subsequently. A full-time job loss of 62,000 in one month is surely significant if it's true, but even in the oil patch, there have been few news reports that could be taken as evidence of such severe job-shedding.

Turning to the sectoral breakdown, we find truly bizarre numbers from the educational sector: a 51,000 decline in employment in the month when the kids go back to school. Delving a little into the StatsCan report, it turns out that the actual number of people employed in the sector actually rose in the month, and it was seasonal adjustment that produced the reported decline. Might be time to take another look at the adjustment factors.

These quibbles illustrate very clearly why you shouldn't read too much into the monthly headline data: there's too much going on under the surface for you to draw reliable conclusions.  Not that that will stop anybody from doing so, but is there anything in today's report that helps us to get a handle on how the overall economy is performing? StatsCan is very helpful here, pointing out that employment grew more than 60,000 in the first quarter (when GDP was reported to have fallen), by more than 30,000 in Q2 (when a second straight GDP decline led the media to scream "recession") and by a further 20,000 in Q3, for which we don't yet have full GDP data. What's more, the total employment gain of 161,000 in the year to September was entirely accounted for by full-time employment.

True, Canada needs to create more than 161.000 jobs in a year to absorb the growth in the labour force. Still, it's hard to be outright pessimistic about these numbers, given what's going on elsewhere.  And it's all but impossible to believe that the economy was really in a recession in the first half of this year.