Canada's economy added a stunning 54,900 jobs in March, whizzing past forecasts and fuelling market expectations that the Bank of Canada's next rate move will be an increase though not for some time yet.
Statistics Canada said on Thursday the unemployment rate stayed unchanged from February at a 31-year low of 6.1 percent as more women took jobs in the services sector. A record high number of Canadians either had a job or were looking for one and the beleaguered manufacturing sector seemed to be making a comeback, according to a report that sparked an immediate rally in the Canadian dollar.
Analysts had forecast, on average, a gain of only 15,000 jobs and an unemployment rate of 6.1 percent, according to a Reuters survey. The first-quarter employment growth of 158,000 jobs was the strongest for that quarter since 2002.
"Another blow-out month for Canadian employment," said Sal Guatieri, senior economist at BMO Capital Markets in Toronto. "I guess we shouldn't be too surprised by upwards surprises in this report, they're occurring on such a frequent basis."
The Canadian dollar jumped to C$1.1521 to the US dollar, or 86.80 US cents, from C$1.1580, or 86.36 US cents, before the data. Bond prices retreated. Wage inflation, closely watched by the Bank of Canada as it prepares to set interest rates later this month, appeared to subside somewhat despite the tight labour market. The average hourly wage of permanent employees climbed 2.1 percent in March year-on-year compared to 2.7 percent in February.
The softer wage inflation fuelled a growing view in markets that the central bank will hold rates steady throughout 2007 and make its first hike next year. "We think the next move by the Bank of Canada will be up, but we won't be looking at it until 2008," said Mark Chandler, bond strategist at RBC Capital Markets in Toronto.
The March employment report is the seventh consecutive one to come in higher than expected. That may raise concerns that businesses are running up against capacity constraints.
"The Bank of Canada has to be awfully cautious about this one, because any time you get job gains of this magnitude and sustained over this period, you do need to be worried about capacity constraints and whether perhaps a firmer monetary policy will eventually prove necessary," said Eric Lascelles, a strategist at TD Securities in Toronto.
The Bank of Canada's next rate announcement is April 24 and markets unanimously expect it to hold rates steady at 4.25 percent, as it has done since May 2006. Over half the jobs created in March - 30,500 - were full-time, another sign of strength.
The March jobs growth was helped by the end of a two-week railway strike in February, which likely boosted activity in the wholesale trade sector and helped add 66,000 jobs to the services sector in March, Statscan said. The services sector has been adding jobs since August 2006.
Women captured most of those positions, Statscan said. Women over 25 took 39,000 of the employment gains in March and over the past 12 months employment growth for women has been double that of men.
Female participation helped boost the overall participation rate in the labour market, which includes those with a job or looking for one, to 67.7 percent, matching an all-time high first seen in April 2004.
The employment rate rose a notch to 63.5 percent, the highest in 31 years. The goods-producing sector lost 11,100 jobs. However, beleaguered manufacturers, which have been shedding workers as they cope with a strong currency and tougher competition, actually added 1,400 workers to their payrolls.
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