Canada's May jobs blowout sparks hopes, caution

Fri Jun 7, 2013 1:03pm EDT
 
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By Louise Egan

OTTAWA (Reuters) - Canada's economy churned out a spectacular 95,000 jobs in May, the second-biggest gain in 37 years, according to an official report that raised hopes the economy is gaining momentum, but was also taken with a grain of salt.

The gain would be the equivalent of the far larger U.S. economy creating nearly 900,000 jobs in one month, well above the 175,000 workers hired there last month.

But Canada's monthly figures are always volatile, given the complications of conducting a survey of households to determine how many jobs have been created, and many analysts prefer to focus on a six-month average.

Canada's unemployment rate ticked down to 7.1 percent in May from 7.2 percent, Statistics Canada said in its report on Friday. The construction sector accounted for nearly half of the May hiring, pointing to the strength of Canada's heated housing sector, and analysts doubted that would last.

The data handily beat market expectations for 15,000 new jobs, but it changes little for the Bank of Canada, which is expected to keep interest rates on hold at their current low levels until late 2014.

"This erases some of the fears in the market that Canada was wildly underperforming the U.S. and the domestic economy was very weak," said Camilla Sutton, chief currency strategist at Scotia Bank in Toronto.

Canada long ago recovered all the jobs lost during the 2008-09 recession, but unemployment remains above pre-crisis levels and net job losses were recorded in the first four months of this year.

After the data, the Canadian dollar jumped to its strongest level against the U.S. dollar since mid-May, rising to C$1.0186, or 98.17 U.S. cents. It gave back some of those gains to trade at C$1.0210 at around 1230 a.m. EDT (1630 GMT) compared with C$1.0250 just before the jobs report.   Continued...

 
Shadows are seen as a man walks down Bay Street in the financial district in Toronto, March 11, 2009. REUTERS/Mark Blinch