Canada pumps out the jobs, unemployment rate falls to 7.1% Add to …

Canada pumps out the jobs, unemployment rate falls to 7.1% Add to …

theglobeandmail.com | Jan 4th 2013 9:57 AM

Canada’s jobs picture continues to surprise on the upside.

Employment rose by 39,800 in December, the fourth increase in five months, Statistics Canada reported Friday.

The unemployment rate fell 0.1 per cent to 7.1 per cent, the lowest in four years.

The expectation among economists was for a slight increase in the unemployment rate.

The startling numbers are far above expectations – many economists were anticipating a decline of about 10,000 jobs or a modest increase of 5,000 or so positions in December.

“Impressive, to say the least, and quite a pleasant surprise following the November widespread increase” said BMO Nesbitt Burns deputy chief economist Douglas Porter.

Mr. Porter said in a recent report that there was a high chance of a pullback in job-creation in December after the stunning surge of 59,300 new jobs in November.

The fact that the December new jobs were all in full-time work is impressive as well, he added.

And the drop in unemployment is “the cherry on top,” he said.

The jobs growth is apparently at odds with Canada’s sluggish economic growth.

“It’s tough to reconcile with other indications,” Mr. Porter said.

Continued uncertainty over the so-called fiscal cliff in the United States – before an 11th-hour deal reached between the White House and the U.S. Congress – was another factor that was expected to dampen hiring activity in Canada.

On the other hand, hours worked were just about flat in the fourth quarter, off sharply from the 2-per-cent increase in the third quarter, Krishen Rangasamy, senior economist at National Bank of Canada, said in a research note.

“Output may suffer as a result, unless of course productivity picks up unexpectedly,” he wrote.

The stronger-than-expected jobs growth is also fuelling speculation that the Bank of Canada will move sooner rather than later on a rate hike.

As in the previous month, Ontario put in the strongest performance, with 33,000 new jobs in December.

Employment was also up in Manitoba, Saskatchewan, Newfoundland and Labrador and Prince Edward Island.

Job creation was stagnant in Quebec, Alberta, British Columbia and New Brunswick.

Employment among private sector employees was up 59,000 in December, with little change in public-sector and self-employment.

The December gains were broadly based and continued a trend of “solid hiring,” Avery Shenfeld of CIBC World Markets Economics said in a research note.

The 39,800 jobs gain seems out of whack with the weak GDP numbers of recent quarters, he said.

Gains included robust hiring in construction, a decent rise in manufacturing, and gains across all service groups except government and professional services, said Mr. Shenfeld.

“But we continue to question the sustainability of this hiring trend in the absence of the output gains that would typically be needed to require all that labour input.”

For the year, Canada saw a total of 311,000 jobs created and the unemployment rate fall to 7.1 per cent from 7.5 per cent at the end of 2011, Dawn Desjardins, assistant chief economist at RBC Economics Research, said in a note.

“The economy’s lacklustre performance is likely to curb any further decline in the unemployment rate in the near term,” she said.

But economic growth prospects for Canada in early 2013 have risen, given lowered risks of a U.S. recession and a more positive global outlook, she said.

“In the near term, the Bank of Canada will likely keep monetary conditions accommodative to ensure that growth picks up pace.”

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