These are stories Report on Business is following Friday, Aug. 15, 2014.
Sorry, wrong number
The monthly reading of Canada’s jobs market is always a key event, but today's new version promises to take the cake.
Traders, economists and policy makers far and wide will be watching closely after the country’s statistics agency took the rare step of pulling a market-moving report and disclosing an unspecified error.
To recap, last Friday Statistics Canada released a surprisingly weak report on how the labour market fared in July. A few days later, on Tuesday, it said that report was flawed, but identified neither the error nor its severity.
Disclosure of the mistake rippled through the currency and bond markets, halted processing of claims under Canada’s employment insurance program, and raised further questions about the credibility of the monthly jobs reports, which can be volatile.
Economists had expected last Friday’s report to show job creation of about 20,000 positions. Instead, it showed just 200 jobs as full-time employment fell sharply and part-time work rose equally sharply.
Some observers believe the new report, which will be released at 8:30 a.m. ET, will show something stronger than the initial 200 jobs, closer to the original projections and possibly as high as 30,000.
Others, however, warn that there’s simply not enough information to make that call.
“The markets are looking for something a little bit better,” said senior economist Benjamin Reitzes of BMO Nesbitt Burns.
“It was so bad that the only way to go was up. But that’s not necessarily true.”
Like some other economists, Mr. Reitzes isn’t making a projection, though he said the overall trend of a weak labour market won’t change.
“The most you can hope for is maybe the start of a good trend,” he said.
Here are eight things to watch for this morning:
1. The total number of jobs won or lost
This will be the main event. While markets appear to be betting on about 20,000, chief economist David Watt of HSBC Bank Canada, for example, expects to see 15,000, while his counterpart at National Bank, Stéfane Marion, projects 30,000.
“Though the corrected July employment report is not expected to be as weak as the now retracted report, we still expect sluggish job creation, consistent with lacklustre economic growth,” said Mr. Watt.
Many others are in the not-so-fast, anything-goes camp.
“Without any hints from [Statistics Canada] on whether ANY of its figures had validity, we can’t really assess the degree of that revision in any reasonable way,” chief economist Avery Shenfeld of CIBC World Markets said in a report today.
2. The jobless rate
The original report showed unemployment dipping to 7 per cent from 7.1 per cent in June because more than 35,000 were seen to have quit the labour force. Mr. Watt, for one, expects the new report to show the jobless rate held at 7.1 per cent.
The jobless rate is important for several reasons, and notably because employment insurance is based on local unemployment levels.
3. The participation rate
Last Friday’s incorrect report showed this key measure – those working or still hunting for a job – slipping to 65.9 per cent to mark the lowest level in some 13 years.
4. The employment rate
The employment rate, or the percentage of those employed in the adult population, slid to 61.3 per cent, basically recessionary lows, in the original report. Any improvement here obviously would be welcome.
Here’s what Mr. Watt said in his original look-ahead to last week’s report, when he expected an employment rate of 61.4 per cent:
“The risk is that the employment rate dips to 61.3 per cent, matching the low hit in the wake of the 2008-09 recession. In our view, employment continues to expand more slowly than the adult population, which has increased by an average 31,680 per cent over the past 12 months.”
5. Full-time versus part-time
The incorrect report showed Canada shed a huge 59,700 full-time jobs in July and gained 60,000 part-time positions. Not what you want to see in the labour market.
Mr. Marion believes the full-time side of the ledger, in today's fresh report, may show a “sizeable revision that would bring the jobs data back in line with current consumption patterns.”
Having said that, Mr. Watt said that “the statement we made on 8 August that ‘full-time employment growth has stalled’ will remain valid.”
6. Private versus public sector
Something of a crap shoot here. The original report showed the private sector hiring, more than reversing the losses of a month earlier, and the public sector hiring to a far lesser extent, while the ranks of the self-employed shrank.
7. The industries
There were some rather big changes among individual sectors in the original report.
Chief among them was the construction industry, which Statistics Canada said last week lost a huge 42,000 jobs, having gained almost 32,000 just a month earlier.
The education sector was also in focus, having won more than 32,000 positions in the initial report, with trouble cited in adjusting for the seasonal aspect.
“There were enough big changes in the industry-specific job changes in July relative to June such that we have little confidence in any theory with respect to what may change this Friday and the direction of the change if it should affect top line job growth,” said Derek Holt and Dov Zigler of Bank of Nova Scotia.
“Big swings occurred in numerous sectors. We’ve been burned on the lack of consistency behind a seasonal adjustment problem affecting education jobs over recent years to know better than to get too carried away with that theory this time.”
Mr. Shenfeld, in turn, said he’s not looking for “simply a correction of a single cell” today.
“Thus, we aren’t likely looking at, for example, just a ‘correction to what looked like an atypically large gain in education jobs (which can happen due to variations in the seasonal timing of when teacher contracts for a given year come to an end),” he said.
“Similarly, we wouldn’t look at outliers in the full- and part-time split for clues on where the change will come.”
8. The market reaction
Since we don’t know what to expect, we have to reset our expectations to those of before last week’s report.
And, thus, keep an eye on the currency and bond markets.
The Canadian dollar lost about half a cent last Friday after the flawed report was released, but perked up again when Statistics Canada disclosed the error.
The loonie, as Canada's dollar coin is known, stood at about 91.7 cents U.S. just before the new report this morning.
A weak report today may well send the currency lower yet again, while a strong report could send it higher, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
Though it’s hard to say exactly what makes for a strong report, particularly since markets expect something better.
“Bet on an upward revision, but don’t put too many chips on the table since the market has appeared to already have priced in some of that good news in erasing a bit of C$ weakness when the story hit earlier this week,” said CIBC’s Mr. Shenfeld.
- Bill Curry: Better news expected in revised Statistics Canada report
- How money may be lost or won on Statistics Canada jobs flub
- Bill Curry: EI claims on hold while Statscan fixes jobs report error
- David Parkinson in ROB Insight (for subscribers): Markets shouldn't have to wait for reliable jobs data
- Canadian dollar nears 92¢ again (but hold that thought)
- Bill Curry: Statistics Canada rushing to redo July job numbers
- 12 jokes: Next jobs report? Your guess is as good as ... a statistician's
- Kevin Carmichael: Surprisingly negative jobs report supports low-rate stance
Stock investors have a bounce in their step this morning.
Tokyo’s Nikkei was almost flat, though Hong Kong’s Hang Seng gained 0.6 per cent.
In Europe, London’s FTSE 100, Germany’s DAX and the Paris CAC 40 were up by between 0.7 per cent and 0.9 per cent by about 8:05 a.m. ET.
New York futures were also up.
“When talking about Wall Street, conversations are no longer being focused on how low it can go but what timeframe is required in order to challenge levels beyond 17,000 once more,” said market analyst Alastair McCaig of IG in London.
“Benefiting from a lack of direct business and energy exposure to Russia has enabled U.S. traders to again focus within rather than worry about European issues.”
BlackBerry on the rise
BlackBerry Ltd. shipments are on the rise, albeit slightly, under new CEO John Chen.
A report yesterday from researcher IDC showed BlackBerry’s operating system capturing 0.5 per cent of the market in the second quarter of the year.
That’s down from a year earlier and the same level as the first quarter. But smartphone shipments rose in the latest period to 1.5 million from the first three months of the year.
That marks a 78-per-cent drop from a year ago but the quarter-over-quarter gain is still notable for the company in the midst of a turnaround.
"Following three consecutive quarters of sequential decline, BlackBerry volumes have rebounded slightly from the previous quarter, but remain 78 per cent lower than shipment levels from a year ago,” IDC said.
“In keeping with its strategy, BlackBerry saw improvement within one of its key markets, Asia/Pacific, as well as some gains among enterprise users within North America and Western Europe.”
Streetwise (for subscribers)
ROB Insight (for subscribers)