Canada's strong May jobs growth adds to case for interest rate hikes
By Leah Schnurr
OTTAWA (Reuters) - Canada's job growth accelerated in May at its fastest pace in eight months, and annual wage growth improved, prompting economists to suggest the Bank of Canada could raise interest rates sooner than anticipated.
Employers added 54,500 jobs last month, Statistics Canada said on Friday, far exceeding forecasts for a gain of 11,000. Driven by full-time hiring, this was the biggest increase since September.
With hiring in both the service and goods-producing sectors, the report adds to evidence of economic momentum after strong growth in the first quarter, analysts said. Bank of Canada Governor Stephen Poloz said on Thursday he was comforted by recent signs of strength.
The unemployment rate rose to 6.6 percent, as expected, as more people looked for work.
"Certainly, the Bank of Canada will find it difficult to ignore a fairly steady stream of positive indicators we are seeing for the economy and the labor market," said BMO Capital Markets senior economist Sal Guatieri.
"Clearly the odds are shifting toward an earlier Bank of Canada rate increase."
A separate report showed first-quarter industrial capacity utilization rose to its highest since 2007.
The jobs data led traders to raise their bets modestly for an interest rate hike by the end of the year, with markets pricing a 26.2 percent probability of an increase by December. The Canadian dollar strengthened against the greenback. [CAD/] Continued...