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Far more constructive to step back and look at broader trend - a general deceleration in hiring, beginning of modest job losses

DragonflyProperties

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Hi all,

An article from the December 6th edition of the National Post (FP Comment). Excerpts:

The obvious question that arises when an employment report blows expectations (yet again) out of the water is to ask whether there is a problem in the methodology.

However, we understand that Statistics Canada conducted an extremely thorough analysis of its calculation and surveying methodology after the strong September job gain, and that everything appeared to be in order: The reported job gains could be accounted for. There is apparently no fundamental flaw in the approach that lends itself to these volatile figures. The survey itself is unbiased.

Instead, two other culprits need to be identified that generate volatility in the series. First, the very definition of a survey requires the use of a limited data set to project an outcome onto an entire population. This can translate into sampling error, even if nothing is inherently wrong.

Second, it could be that the Canadian labour market itself is truly quite volatile. Given swings in the Canadian dollar, commodity prices and the economic outlook (among other factors), businesses can hardly be blamed if they aren`t sure whether to hire or fire. Note, also, that the reported figure measures not the number of actual jobs created in a month, but rather the difference between jobs created and jobs destroyed.

If the survey itself isn`t at fault (barring the omnipresent option of increasing its sample size, which will make any survey more accurate), what can be done to help separate the wheat from the chaff?


One option is that you could look at Canada`s somewhat overshadowed establishment survey of businesses instead of the traditional labour force survey. But this doesn`t get you very far on its own, as the establishment survey has a lower correlation with monthly real GDP than the usual employment report, and it is two months delayed to boot. However, this doesn`t make it a complete write-off.

In the present context, it could be that the November figures overstate the degree of job losses, but it could be that they don`t. There really isn`t any way to determine this precisely. It is far more constructive to step back and to look at the broader trend -- a trend that suggests a general deceleration in hiring and perhaps the beginning of modest job losses in Canada.


http://www.financialpost.com/story.html?id=1039531

Keith
 
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