Markets eye jobs numbers
Statistics Canada faces scrutiny after gaffe in July report
It was not a marquee month for our national number cruncher.
As Statistics Canada readies its latest employment report — this one for August, to be released Friday — a cloud still lingers over the data agency’s jobs tally for the previous month.
That’s because Statistics Canada goofed up — big time — in compiling its Labour Force Survey, unarguably one of the most important chunks of data used by policymakers, business leaders and investors.
For some time, the agency has drawn a critical eye from opposition politicians, who accuse the Conservative government of gutting the data agency and other federal services with sharp budgetbalancing funding cuts.
But technical glitches and human error inflicted the latest, and possibly unkindest cut of all on Statistics Canada — a wildly incorrect reading of employment.
The July growth in jobs, as reported on Aug. 8, came in at just 200, when most forecasters had expected at least 20,000 positions to be created. Even more surprising was that no one at the agency noticed any errors until days after the report was released.
Less surprising, perhaps, was that many economists shrugged off the huge miss in forecasts as more of the same volatility that has characterized Canada’s labour environment in recent months.
In the end, Statistics Canada revised the July employment growth on Aug. 15 to a whopping 42,000 — twice what analysts had expected — and blamed “human error” for the “isolated incident.” The agency has since conducted a review of its procedures and is instituting changes.
“To me, what it really drives home, is that we should all be very careful in interpreting these results — not because they might have errors in them but because it’s a variable report and always has been, and it always will be,” said Douglas Porter, chief economist at BMO Capital Markets.
This Friday, Statistics Canada will have another go at the Labour Force Survey — this one for August. That makes three monthly jobs reports in five weeks, and still there is uncertainty over the pattern of its findings.
“Of course, the report has famously been see-sawing between positives and negatives for the last eight months,” Porter said.
“We had the increase last time. We (should be) due for a decline if that pattern continues. (But) we’re actually assuming a small increase because we do think that employment is, in fact, gradually grinding ahead.”
BMO forecasts the August tally to produce as many as 12,000 new positions, while the consensus among another economists is for a less-enthusiastic 9,000 gain. Most expect the unemployment rate to remain at seven per cent.
Last week, Statistics Canada reported the economy grew at an annualized pace of 3.1 per cent in the second quarter of this year — beating private-sector estimates of 2.7 per cent.
But the agency also revised output between January and March to 0.9 per cent from an initial estimate of 1.2 per cent. Severe weather conditions at the start of 2014 have been blamed for much of the weak and sporadic growth in the first quarter.
“Until growth comes in sustainably stronger than potential, job gains are unlikely to improve and the unemployment rate is unlikely to decline,” said Charles St-Arnaud, an economist at Nomura Securities in London, who previously worked at the Bank of Canada and the Finance Department.
“The continued lacklustre labour market suggests that consumer spending could weaken in coming quarters.”
St-Arnaud added that “the underlying momentum in the economy has not changed.
“This means we expect growth to slow in Q3 and reach about 2.2 per cent (annualized), likely leaving the BoC’s expectations unchanged that growth will be 2.3 per cent in Q3.”
The Bank of Canada’s trendsetting interest rate has been at a near-record low of one per cent for the past four years. On Wednesday, bank governor Stephen Poloz and his policy team will announce its latest rate decision — a decision that is primarily linked to the pace of inflation, another of Statistics Canada’s key data releases.
“We think the BoC is likely to remain cautious on the economy as we have yet to see a pickup in business investment and exports. We also believe that a rate cut is now highly unlikely and would require an important adverse shock to the economy,” St-Arnaud said.