Job Report Error Leaves Statistics Canada With Black Eye

Canada’s statistics agency said it had under-reported the country’s job creation in July by more than 41,000, a revision that one private economist called a “black eye” that raises questions about the bureau’s competence.

Employment rose by 41,700, Statistics Canada said today, three days after it retracted its initial estimate of 200. The unemployment rate wasn’t affected, falling to 7.0 percent from 7.1 percent in June. Staff failed to run a computer program that is part of a scheduled update to the survey, leaving uncounted workers who should have been classified as full-time employees, the Ottawa-based agency said.

“I cannot believe how broadly based the revisions are,” said Derek Holt, Scotiabank’s vice-president of economics in Toronto, by e-mail. “This is a black eye on StatsCan, which is unfortunate as it is otherwise among the elite data agencies anywhere in the world.”

Three days after flagging the error, the agency revised the monthly loss in full-time jobs to 18,100 from 59,700 and raised the employment gain in the province of Ontario to 39,500 from 15,100.

“In my over two decades of experience in this business, I struggle to think of a comparable foul-up anywhere in the world,” Holt said in a research note.

Today’s corrections also increased the gain in the number of people classified as employees to 78,700 from 29,400, and boosted the July gain in services employment to 68,000 from 34,300.

What Happened?

The agency said it will publish a report on what happened within the next two weeks, after economists had to wait three days between hearing about the error and receiving the correct data. “This was an isolated incident,” Chief Statistician Wayne Smith said in a statement today. “I am fully confident in the integrity of the Labor Force Survey.”

The mistake recalled the June 2 incident where the U.S. Institute for Supply Management twice corrected its May manufacturing index after saying it applied incorrect seasonal adjustments to the data.

Today’s changes to the Canada’s labor data “make more sense given the snap back we were expecting to see in the second quarter,” Bank of Montreal senior economist Robert Kavcic said by phone from Toronto, adding the agency’s reputation remains “tarnished a little bit” after the correction.

Momentum Signs

Economists surveyed by Bloomberg News projected a 20,000 job increase following June’s decline of 9,400, and a jobless rate unchanged at 7.1 percent, according to median forecasts.

The government is comfortable that the agency got to the bottom of the error and it won’t happen again, Finance Minister Joe Oliver said following a speech in Winnipeg, Manitoba. The error shouldn’t have an impact on Statistics Canada’s reputation as it has a long record of confidence and integrity, he said.

“They made a mistake, they corrected it,” Oliver said. “We hope that will inspire the type of confidence that currently Statistics Canada needs going forward.”

Other recent signals of momentum in world’s 11th largest economy include stronger consumer spending on cars and houses, record merchandise exports and a jump in non-residential building permits. Bank of Canada Governor Stephen Poloz has said that a sustainable recovery will require business spending to catch up to consumers to bring the economy to full output.

Canada’s dollar was 0.1 percent stronger at C$1.0891 per U.S. dollar at 2:56 p.m. Toronto time.

Average Wages

Average hourly wages of permanent employees rose 1.9 percent in July from a year earlier, matching the prior month.

The job gains were led by 46,100 new jobs in education and 17,100 information, culture and recreation workers, Statistics Canada said today.

Part-time positions rose by 59,900 in July, nearly unchanged from the 60,000 initially reported.

The labor force participation rate was unchanged in July at 66.1 percent, matching the pace set from April to June and the lowest since November 2001. Last week, Statistics Canada erroneously put the rate at 65.9 percent, the lowest since October 2001.

Craig Alexander, chief economist at Toronto-Dominion Bank and a former Statistics Canada analyst, agreed that the agency should look at both the one-time error and the broader concern about large swings in the monthly data, such as July’s 41,700 gain that followed a decline of 9,400 in June.

The agency’s credibility may not suffer a “lasting impact” if they fix this month’s error and avoid another one in the future, Alexander said.

“It was surprising that it went through the layers of checks and this error wasn’t caught,” he said by telephone. “They can’t afford to have these sort of mistakes.”

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