Canada Jan jobs boom contradicts flagging output

by David Ljunggren

Canada added 88,900 jobs in January, almost nine times the number forecast, but analysts said Friday the data did not seem to be consistent with other indications that output is flagging. Statistics Canada said the overall jobless rate moved up to 6.2 percent, as expected, from 6.1 percent in December because more people had joined the work force. The increase in the number of jobs was far greater than the 10,000 new positions predicted by analysts. Analysts said if the figures were accurate they would douse speculation that the Bank of Canada was planning to cut interest rates. “I think it quashes talk of the Bank of Canada easing. It's very difficult to think that the bank would seriously consider easing with the jobs number on fire like this,” said Doug Porter, deputy chief economist at BMO Capital Markets, in Toronto. Statistics Canada said the healthy jobs data reflected booming growth in the western provinces of British Columbia and Alberta. In January the number of full-time positions rose by 45,900 while the number of part-time jobs went up by 42,900.

The figures contrast with gloomy predictions by the Bank of Canada, which last month slashed its estimates for fourth-quarter growth to 1.5 percent – down from its previous forecast of 2.8 percent – although it saw growth rebounding to 2.4 percent in the first quarter. “These numbers really, really don't square with the underlying softness that we're seeing in the Canadian economy,” said Marc Levesque, a bond strategist at TD Securities in Toronto. Mark Chandler, a bond strategist at RBC Capital Markets, said the figures made him question Statistics Canada's figures for employment and output. “It still leaves us with the problem that we've had for several months: we still can't square the growth of employment with the estimated growth in output,” he said. The Canadian dollar rose sharply to C$1.1777 to the U.S. dollar, or 84.66 U.S. cents, up from C$1.1843, or 84.44 U.S. cents, before the data. Porter said the seemingly contradictory jobs and output data could be explained by high immigration levels which forced new entrants to the labor force to take low-paying jobs. “It's also partly explaining the low productivity performance of the economy, the fact that people are taking whatever work they can get,” he said. The long-suffering manufacturing sector – hit hard by the strong Canadian dollar, higher costs and increased competition – grew for the third month in a row. Employment rose by 3,600 but the sector has lost 11,400 jobs since January 2006. The annual rate of increase in the average hourly wages of permanent employees continued to drop. The figure grew by 2.0 percent in January from January 2006, compared to rises of 2.3 percent and 2.8 percent in December and November respectively.