Canada Posts Surprise Drop in Jobless Rate to 6.5%

Canada’s unemployment rate unexpectedly fell to a six-year low last month on hiring led by retailers and financial companies.

Employment rose by 43,100 after a jump of 74,100 the prior month and the jobless rate fell to 6.5 percent from 6.8 percent, Statistics Canada said today in Ottawa. Both results exceeded all economist predictions in a Bloomberg News survey that called for unemployment to rise to 6.9 percent on 5,000 job losses.

The biggest two-month increase in jobs since April 2012 suggests the torpor that had plagued the nation’s labor market may be lifting. Before today’s report, average monthly increases had slowed to 12,200 since the beginning of 2013, about half the pace of the three years prior, leading Bank of Canada Governor Stephen Poloz this week to suggest the low jobless rate masked underlying weakness.

Today’s report is “solid the whole way through,” David Tulk, chief Canada macro strategist at TD Securities in Toronto, said by e-mail. “It will present a huge challenge to the Bank of Canada, which has recently embraced labor market metrics to justify greater slack in the economy.”

Retailing and wholesaling employment rose by 38,500 in October, Statistics Canada said today. Finance, insurance, real estate and leasing added 35,700 jobs and manufacturing employment rose by 33,200.

Debt Yield

Canada’s currency reversed losses after the report, climbing 0.5 percent to C$1.1362 per U.S. dollar at 10:18 a.m. in Toronto. The yield on government benchmark two-year debt climbed 1 basis points to 1.04 percent.

Full-time employment rose by 26,500 and part-time positions gained 16,500. Private companies added 70,600 workers and public-sector employment fell by 53,800.

“The general direction is very positive,” Finance Minister Joe Oliver told reporters in Toronto today. Oliver’s Conservative Party has touted Canada as having one of the strongest job markets in the Group of Seven industrialized nations ahead of elections scheduled for next year.

Even with strong gains in the last two reports, employment growth over the last 12 months of 1.0 percent has lagged growth in the working-age population of 1.2 percent. Average hourly wages of permanent employees rose 1.9 percent in October from a year earlier.

“These latest job figures are encouraging, but we suspect the Bank of Canada will need far more convincing evidence supporting its long awaited export-led recovery hopes,” said David Madani, an economist at Capital Economics in Toronto.

Participation Rate

The jobless rate has declined this year as economic growth accelerates and people give up looking for work. Today’s report showed the labor force participation rate remained at the lowest since November 2001 at 66.0 percent.

Poloz said this week labor conditions point to “material slack” in the Canadian economy, and estimated the country is two years away from returning to full output.

For workers aged 15 to 24, employment rose by 4,400 in October, and 26,500 people left the labor force, Statistics Canada said. That lowered the group’s unemployment rate to 12.6 percent from 13.5 percent.

Employment in the province of Ontario rose by 37,000 last month, with the jobless rate falling to 6.5 percent from 7.1 percent.

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