Canada's economy added fewer jobs than expected in May but a still-tight labour market plus decent trade and housing data published on Friday will likely keep the Bank of Canada on track to hike interest rates.
The economy added just 9,300 jobs last month as the manufacturing and trade sectors shed workers, Statistics Canada said. That was less than half the number forecast by analysts in a Reuters poll. The unemployment rate stayed at a 33-year low of 6.1 percent, in line with market forecasts.
"We're continuing to shed momentum in the second quarter, but still, in the context of the labour market, conditions remain very tight," said Stefane Marion, assistant chief economist at National Bank of Canada in Montreal.
The report followed a 5,200 dip in employment in April and provided no support for the Canadian dollar, which initially retreated from near 30-year highs. But subsequent reports on the April trade surplus and housing starts in May both topped analyst expectations, helping the currency rebound. It stood at C$1.0620 against the US dollar, or 94.16 US cents, at 11:15 am (1515 GMT), up from C$1.0662, or 93.79 US cents earlier in the day. From August to April, the economy added jobs at a blistering pace.
"The expectation of the (central) bank is that the gains we've seen in employment so far were largely unsustainable ... so I think this is pretty much in their wheelhouse," said Mark Chandler, bond strategist at RBC Capital Markets in Toronto. The Bank of Canada, which has made no interest-rate moves since May 2006, signalled last week that it would need to raise rates in the near term to cool the economy and rein in inflation. Canada's benchmark overnight rate is 4.25 percent.