WRAPUP 2-Healthy Canada jobs, factory data spur optimism on economy

Fri Aug 15, 2014 11:34am EDT
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(Adds context and reaction from analysts and finance minister; adds Canadian dollar reaction)

By David Ljunggren

OTTAWA Aug 15 (Reuters) - Canada reported unexpectedly healthy jobs and manufacturing sales data on Friday, boosting market optimism that the sluggish economy might finally be starting to accelerate.

Despite a recovery in the United States, Canada's main trading partner, the Canadian economy has been creating few jobs and has been operating well below full capacity.

Statistics Canada issued revised data on Friday that showed 41,700 jobs were created in July and that the unemployment rate dropped to 7.0 percent from 7.1 percent in June.

Market analysts had forecast a gain of 20,000 jobs. Statscan reported on Aug 8 that just 200 new positions had been created in July, but later withdrew that data, citing processing errors.

"Overall, this does suggest that Canada's labor market is improving after hitting a soft patch in the first half of the year. That's now reflecting stronger economic growth," said Sal Guatieri, a senior economist at BMO Capital Markets.

The Bank of Canada has kept its key interest rate at near-record lows since September 2010 to try to stimulate economic growth, and says it will not consider an increase until the economy shows signs of a sustained recovery.

"If we see consecutive gains in employment, certainly along this order, that would change the tone at the Bank of Canada," Guatieri told Reuters.   Continued...