Closely tracked by policymakers, businesses, the media, and analysts, the Labour Force Survey (LFS) is arguably the most important data release each month. The results can affect everything from interest rate decisions by the Bank of Canada to an individual’s decision to try their luck looking for work in a different part of the country.

In the U.S., the jobs report for September has been delayed because of the government shutdown. This means the U.S. Federal Reserve lacks crucial, up-to-date data as it tries to balance the two halves of its dual mandate of promoting maximum employment and stable prices.

With employment growth slowing and the unemployment rate rising in Canada amid trade tensions, we will be looking at tomorrow’s LFS results to see if things are getting better or worse. In the meantime, we thought it might be worth reviewing how the LFS works and what some of the key terms mean.

It might surprise some readers that we don’t actually count the number of people working or looking for work. Instead, Statistics Canada estimates employment and unemployment by surveying a sample of about 65,000 households that include approximately 100,000 individuals. The monthly results reflect the employment status of respondents during a “reference week” rather than a full month.

Like any survey, the LFS is not 100% accurate, but is subject to a margin of error. With that said, the LFS is a sophisticated data collection exercise that yields high-quality and timely data about the Canadian labour market.

The survey targets Canadian residents aged 15 years and older. As such, it includes “seniors” aged 65 and older. It includes Canadian citizens, permanent residents (a.k.a. landed immigrants) as well as non-permanent residents. It excludes people living on reserves, full-time members of the regular Armed Forces and persons living in institutions (including inmates of penal institutions and patients in hospitals and nursing homes).

Another key thing to note about the LFS is that it only counts a person’s “main” job. If a respondent holds more than one job, the job at which they usually work the most hours is what gets counted.* As a result, the total number of jobs in Canada is greater than the estimate of total employment estimated by the LFS.

The results of the LFS are typically reported in seasonally adjusted terms. This means that the numbers have been adjusted to account for annually-recurring fluctuations such as when school is out and when construction activity is usually highest due to weather conditions.

The labour force refers to the population 15 years of age and older who, during the survey reference week, were employed (in either an employer-employee relationship or self-employment**) or unemployed. To be considered unemployed, you have to be actively looking for work, not just without a job. If you are absent from work but have a job, you are still considered employed. Unpaid housework and volunteer work are not counted as work for purposes of the LFS.

The participation rate is the labour force expressed as a percentage of the population aged 15 years and older. A higher participation rate typically means the labour market is creating enough employment to keep a relatively large proportion of people working and looking for work. A falling participation rate can indicate an increase in discouraged workers who drop out of the labour force because they don’t think they will find work.

The employment rate is the number of employed persons expressed as a percentage of the population 15 years of age and older. The higher the employment rate, the larger the portion of the population (15+) that is employed.

The unemployment rate is the number of unemployed persons expressed as a percentage of the labour force. A rising unemployment rate is a clear sign of distress in the labour market. Recently in Alberta, the unemployment rate has been rising not because employment has been falling, but because the labour force has been growing. While still a problem, this is a less difficult challenge to overcome than a sustained net loss in employment. We will be watching tomorrow’s LFS results to see if this is still the case.

*The information available from the LFS regarding full- or part-time status, industry and occupation refer to the main job, as does employee information regarding wages, union status, job permanency, and workplace size.

**The self-employment category includes working owners of an incorporated business, farm or professional practice, or working owners of an unincorporated business, farm or professional practice. The latter group also includes self-employed workers who do not own a business (such as babysitters and newspaper carriers).

Answer to the previous trivia question: Thanksgiving is not a statutory holiday in Prince Edward Island, Newfoundland and Labrador, New Brunswick, and Nova Scotia.

Today’s trivia question: True or false: Pumpkins were once (and maybe still are by some) recommended for removing freckles.