June 5, 2015 / 1:58 PM / 2 years ago

WRAPUP 2-Canada's job gains biggest in 7 months, buoyed by manufacturing

3 Min Read

(Adds details on wage pressures picking up)

* Job gains beat expectations

* Wages for permanent workers rise

* Bank of Canada seen holding steady on rates for now

By Leah Schnurr

OTTAWA, June 5 (Reuters) - Canadian jobs growth surged by the most in seven months in May, buoyed by strength in the manufacturing sector, in an encouraging sign following an oil-induced economic slump at the beginning of the year.

The monthly jobs report also showed wage pressures picking up, but it did not alter expectations that Canada's central bank will likely keep interest rates unchanged for now following a surprise rate cut in January.

Canada added 58,900 jobs last month, data from Statistics Canada showed on Friday, handily topping expectations for a gain of just 10,000. A tick up in the participation rate saw the unemployment rate hold at 6.8 percent.

The report was a welcome improvement from April, when Canada lost 19,700 jobs, and raised hopes the economy was rebounding from a first-quarter contraction blamed largely on lower oil prices. Oil is a major Canadian export.

The Bank of Canada expects the economy will regain momentum as the year progresses and that the oil shock likely will have been confined to the early part of 2015.

"All told, nothing not to like in the May jobs figures and perhaps the first signal that the economy is emerging from its first-quarter dive," Avery Shenfeld, chief economist at CIBC World Markets, said in a note.

In another sign of strength, wages for permanent workers averaged C$25.89 ($20.71) an hour, up 2.9 percent from May, 2014. Separate labor productivity data showed average hourly compensation increased by 1.1 percent in the first quarter.

The Canadian dollar rose against the U.S. dollar before giving up some of the gains as markets reacted to unexpectedly stronger U.S. job gains in May.

In Canada, manufacturers added 21,500 positions, with employment in the sector rising for the second consecutive month. Gains were seen in a variety of other industries, including an increase of 20,700 jobs in health care and social assistance and 16,800 in trade.

Job creation was concentrated in the private sector, which added 56,800 positions, while the public sector lost 19,100 jobs.

Still, the natural resources sector, which includes oil and gas extraction, shed 2,400 jobs and the province of Alberta, where the country's vast oil sands are located, lost 6,400 jobs.

In contrast, Ontario added 43,900 jobs. Economists have been looking for Canada's largest province and its industrial hub to benefit from cheaper oil and a weaker Canadian dollar.

While economists were cheered by the data, they noted the jobs report can see large swings.

"I don't think it takes away from the bigger picture that employment is still generally struggling, but nevertheless it's one of the more encouraging employment reports we've seen out of Canada in quite some time," said Doug Porter, chief economist at BMO Capital Markets.

($1 = 1.2500 Canadian dollars)

Additional reporting by Allison Martell in Toronto; Editing by Paul Simao

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