Canada Employment Rebounded in March on Public Sector

Canadian employment rebounded in March, climbing almost twice as fast as economists forecast, led by government workers.

Employment rose by 42,900, the most in seven months, following a decline of 7,000 in February. The jobless rate fell to 6.9 percent from 7.0 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 22,500 job increase and a jobless rate unchanged at 7 percent, according to median forecasts.

Canada’s dollar rose after the report added to signs of modest economic growth, including rising exports and home sales. Bank of Canada Governor Stephen Poloz said the first-quarter expansion may have been slowed by the impact of a harsh winter, leaving the world’s 11th-largest economy with significant unused capacity.

“It was a decent report for Canada,” said Mark Chandler, head of fixed-income research at RBC Capital Markets in Toronto. “The overarching story is Canada has got a lot less slack than the U.S. when it comes to the labor market.”

The Canadian dollar strengthened 0.5 percent to C$1.0979 per U.S. dollar at 10:38 a.m. in Toronto. One Canadian dollar buys 91.08 U.S. cents. The two-year Canadian government bond yield rose as much as 2 basis points to touch 1.12 percent, the highest since Jan. 7.

Canada’s faster-than-expected job gain contrasted with a U.S. payrolls increase of 192,000 that was close to predictions of a 200,000 gain in March. Three-quarters of Canada’s exports are sent to the U.S., and Poloz has said demand in the economy needs to rotate to exports and investment, away from debt-fueled consumer spending.

‘Harsh Winter’

“Canada’s employment prospects should improve further in the months ahead as the economy rids itself of the effects of the atypically harsh winter, and gets a lift from an acceleration in U.S. growth,” said Krishen Rangasamy, senior economist at National Bank Financial in Montreal.

Public-sector employment rose by 39,300 in March, following a drop of 50,700 in February, while private-sector employment rose by 3,900. The health care and social assistance category, dominated by government-funded institutions, saw the biggest gain with an increase of 23,600 jobs in March.

The labor force participation rate held at 66.2 percent in March, matching the lowest since December 2001.

Skills Shortages

The job market has been a debating point in Canada’s Parliament in recent weeks, with a report from the legislature’s budget officer saying there are few indications of skilled labor shortages. The Conservative government of Prime Minister Stephen Harper has said there are positions in specific sectors and regions that can’t be filled, and has touted Canada’s job record as the best among Group of Seven countries since the global financial crisis.

“Our Government is pleased to see solid growth in the job market,” Finance Minister Joe Oliver said in an e-mailed statement. “While these gains are positive, we must continue to focus on jobs and the economy.”

Today’s report showed part-time employment rose by 30,100 jobs in March while full-time work increased by 12,800.

Workers designated by Statistics Canada as employees rose by 43,200, and the self-employed category decreased by 500.

Average hourly wages of permanent employees slowed to 2.4 percent in March from a year earlier, from the 2.7 percent pace of the prior two months.

Separately, Canada’s Ivey purchasing managers’ index fell to 55.2 in March on a seasonally adjusted basis from a February reading of 57.2, according to a statement on the website of Western University’s business school.

The slower wage gains and the heavy dose of government instead of private sector jobs in March suggest the labor market still has room to improve, said Doug Porter, chief economist at BMO Capital Markets in Toronto.

“While the latest results are certainly welcome, they are not a game-changer for the broader economic outlook,” he said.

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