Canada January employment bounces, dampening rate cut talk

Fri Feb 7, 2014 1:58pm EST
 
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By Randall Palmer

OTTAWA (Reuters) - The Canadian economy in January recouped 29,400 of the 44,000 jobs lost in December, and the unemployment rate fell to 7.0 percent from 7.2 percent, diminishing talk of a possible interest rate cut by the central bank.

Statistics Canada said on Friday that full-time positions rose by an estimated 50,500, the largest such increase since May. However, 28,300 of the new jobs were in self-employment, which usually is less secure and carries fewer benefits.

Royal Bank of Canada assistant chief economist Paul Ferley said the fact that the unemployment rate fell in January after December's rise laid "to rest concerns that maybe the December number was pointing to an onset of greater weakness in labor markets."

Ferley added: "I think this increase in employment in January dampens expectations of the possibility of the Bank of Canada having to cut rates. But certainly with inflation remaining low, there's no pressure to start moving rates higher."

The employment gain, the largest since August, exceeded a forecast for 20,000 new positions by economists surveyed by Reuters. The economists had expected the unemployment rate to fall only to 7.1 percent.

The Canadian numbers contrasted with a U.S. report that showed job creation slowed sharply over the past two months. Nonetheless, U.S. nonfarm payrolls rose by 113,000 in January and the jobless rate fell to 6.6 percent from 6.7 percent.

The two countries measure unemployment differently, and Statistics Canada said the Canadian rate of 7.0 percent would have been 6.0 percent if U.S. methods had been used. In November it was 6.9 percent.

BMO Capital Markets chief economist Doug Porter said the December weakness was now shown to have been mostly due to harsh weather. "I think the bottom line is it wasn't nearly as bad as what was suggested a month ago," he said.   Continued...

 
A construction worker sweeps snow from iron beams on the Bay Adelaide East office building site after a storm in Toronto February 6, 2014. REUTERS/Chris Helgren