The unemployment rate and labour force statistics

Each month, Statistics Canada releases the Labour Force Survey. It includes the number of employed Canadians, the unemployment rate up to the previous month, and a breakdown of unemployment rates by province and industry.

Since a rising unemployment rate indicates economic weakness, Canadian markets react negatively to announcements of lower employment and higher unemployment. This can have a particularly strong impact on market sectors that are reliant on consumer spending, such as consumer products and retail.

In the U.S., the Department of Labour announces a set of employment statistics each month. These include the U.S. unemployment rate, the number of new jobless claims filed by unemployed workers, as well as a breakdown of employment numbers by economic sector.

Both Canadian and U.S. stock markets tend to react strongly to the U.S. unemployment rate if it rises (a negative, since it's an indicator of economic weakness) or falls (a positive reaction, since it indicates economic strength).

Following how the market is anticipating and reacting to the release of employment numbers can lead to trading opportunities. For example, rising unemployment can indicate gathering clouds on the economic horizon, which may lead some investors to sell their stocks. Other investors could see this as a buying opportunity if they conclude the market has overreacted to negative employment numbers.