Canada’s Unemployment Rate Drops to 7.1% as 60,900 Find Jobs in September

Canada’s economy added the most jobs in eight months in September, led by hiring at schools, bringing the country’s jobless rate to its lowest since 2008 and adding to evidence the country is averting a new recession.

Employment rose by 60,900 after a decline of 5,500 in August, Statistics Canada said today in Ottawa. The unemployment rate fell to 7.1 percent, its lowest since December 2008. Bloomberg News surveys called for a job gain of 15,000 and unemployment to remain at 7.3 percent.

The rise marks a recovery for the country’s labor market after the economy added a net 1,600 workers in the previous two months, bringing the average monthly gain in the third quarter to 20,833. The world’s 10th-largest economy shrank in the second quarter, two years after its last recession.

“It helps to allay some of those fears that Canada does get dragged down into a recession,” said David Tulk, chief macro strategist for Canada at Toronto-Dominion Bank’s TD Securities unit in Toronto. “This helps to maybe force the market to reconsider its current pricing of Bank of Canada cuts.”

Two-year government bond yields rose three basis points to 0.97 percent at 4:43 p.m. in Toronto. The Canadian currency fell 0.2 percent to C$1.0392 per U.S. dollar from C$1.0371 yesterday. It touched C$1.0658 on Oct. 4, the weakest level since August 2010. One Canadian dollar buys 96.23 U.S. cents.

Growth Prospects

Finance Minister Jim Flaherty said in an e-mailed statement today the jobs data reflect the country’s growth prospects.

“September’s job growth shows Canada is on the right track for steady, modest job creation and economic growth,” Flaherty said in the statement. He also said the unemployment rate still remains too high.

The jobs report is the last before the Bank of Canada’s next interest-rate decision on Oct. 25. The central bank has held its key rate at 1 percent since September 2010, and Senior Deputy Governor Tiff Macklem said in a Sept. 27 speech policy makers would be “prudent” with interest-rate increases during a slow economic rebound threatened by weak U.S. demand and Europe’s debt crisis.

Some investors are betting the central bank’s next move will be a cut. The three-month overnight index swap rate, which is based on what investors expect the central bank’s rate will average during that period, rose to 0.936 percent, from 0.934 percent yesterday. That’s below the central bank’s 1 percent target for overnight loans between banks. It traded as low as .908 percent earlier this week.

Economic ‘Headwinds’

Today’s jobs report also highlights some of the “headwinds” faced by the economy, Tulk said. Half of the 16 industries tracked by Statistics Canada recorded declines, which were offset by boost from a “statistical quirk” in the data for education services.

The monthly gain was led by 38,400 new jobs in education services, and a 35,600 increase for professional and scientific services. Public sector jobs rose 36,900, while employment in the private sector was down 14,900.

Employers recorded the lowest quarterly job gain over the past three months since the fourth quarter of 2010.

The report was “better than expected for sure, and I’ll take that,” said Stewart Hall, a currency strategist at RBC Dominion Securities in Toronto. “But a game changer? I don’t think so.”

Finance Losses

The finance, insurance, real estate and leasing industries saw 35,300 jobs lost in the month. Construction companies added 11,600 new jobs during the month, while natural resources firms hired 17,100 workers.

Canada’s jobless rate has been below the U.S. since October 2008. The Labor Department in Washington today reported payrolls climbed by 103,000 workers in September, compared with a median forecast of 60,000 in a Bloomberg News survey.

In Canada, full-time employment rose by 63,800 in September, while part-time jobs fell by 2,900.

Canadian average hourly wages rose 1.5 percent in September from a year earlier, the report said. Wages rose at a 1.4 percent pace in July and August, the slowest June 2003.

Self-employed workers rose by 38,900, while workers classified as employees increased 22,000.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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