Canadian employment rose more than five times faster last month than economists predicted, bolstering the central bank’s view that it may raise interest rates as the economy recovers.
Employment rose by 52,100 following an August gain of 34,300, Statistics Canada said today in Ottawa. The jobless rate rose to 7.4 percent from 7.3 percent as the labor force grew by 72,600. The job gain exceeded all 24 forecasts in a Bloomberg economist survey with a median of 10,000. The unemployment rate was forecast to be unchanged.
Bank of Canada Senior Deputy Governor Tiff Macklem said yesterday that some slack remains in the job market and reiterated policy makers may raise their 1 percent benchmark interest rate as the economy recovers. The Canadian dollar appreciated 0.3 percent to 97.79 cents per U.S. dollar at 1:42 p.m. in Toronto on signs of a durable economic recovery.
“The story is still there, we are moving forward,” said Emanuella Enenajor, an economist at Canadian Imperial Bank of Commerce in Toronto. “If we see a pickup there is a justification for tightening policy.”
Other Group of Seven central bankers have added stimulus this year to boost growth including asset purchases by the U.S. Federal Reserve. There was some evidence the U.S. economy is also improving today, with the American jobless rate unexpectedly falling to 7.8 percent in September.
Canada’s recovery may still be slowed by problems such as Europe’s debt crisis, said Shaun Osborne, Toronto-based chief currency strategist at Toronto-Dominion Bank.
“It may be difficult for the Canadian economy to keep producing these kinds of job numbers,” Osborne said. “It’s going to be quite some time still before the Bank of Canada can tighten interest rates.”
Economists surveyed by Bloomberg forecasting unemployment will average 7.2 percent next year and 6.9 percent in 2014. Enenajor at CIBC said the central bank may keep rates unchanged through next year.
Still, trading in overnight index swaps showed investors pricing in 10.9 basis points of tightening for the central bank’s May 2013 decision today. At the start of the week trading had erased most bets on a rate increase.
Today’s report showed that full-time employment rose by 44,100 in September. Part-time positions rose by 8,000, Statistics Canada said. Private companies added 29,100 workers and public-sector employment fell by 10,800.
Retailers and wholesalers added 34,100 workers in September. Construction employment gained by 28,800 following a decline of 44,000 in August that was the largest since December 2008.
Finance Minister Jim Flaherty said in a statement today he is “encouraged” by the job report, which he said shows Canada has “the best job creation record in the entire G-7.”
The companies adding to payrolls include Air Canada. Last month the country’s largest airline said it will hire 200 flight attendants and pilots in the next year for a new leisure carrier and more than 900 additional employees at the main airline.
Workers designated by Statistics Canada as employees rose by 18,300 while the self-employed increased by 33,800 in September.
Average hourly wages of permanent employees rose 3.3 percent from a year earlier, lagging the prior reading of 3.7 percent. That measure, which the Bank of Canada says is a key indicator of inflation, rose 3.9 percent in July, the fastest since April 2009.