Big February jobs growth stuns market

Fri Mar 7, 2008 1:37pm EST
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By Louise Egan

OTTAWA (Reuters) - Canada's economy added five times more jobs than expected in February in another sign the domestic economy is racing ahead even as exports sag in the wake of the U.S. economic downturn.

Statistics Canada said on Friday that the economy added 43,300 jobs last month, defying market forecasts of a more tepid gain of 8,000 amid signs of softer growth. The unemployment rate remained unchanged at a 33-year low of 5.8 percent.

The news sent the Canadian dollar flying to a one-week high against the U.S. dollar and left economists scratching their heads.

"Mind boggling," said Derek Burleton, senior economist at Toronto-Dominion Bank. "I'm obviously a little shocked right now," he told Reuters.

The sizzling numbers appear to contradict last week's report showing that annualized economic growth slowed in the fourth-quarter of 2007 to 0.8 percent from 3 percent in the previous quarter and that the economy contracted 0.7 percent in December.

"It seems that the slower the Canadian economy grows, the more workers it needs to hire," said Avery Shenfeld, senior economist at CIBC World Markets, in a note.

"This simply defies logic, and after being stunned this month, we'll simply push off our forecast for weaker job gains into March," he said.

The Bank of Canada chose to ignore the red-hot labor market when it slashed its key interest rate on Tuesday by a half-point to 3.5 percent, arguing that the specter of a protracted U.S. slowdown outweighed any inflationary risk from strong domestic demand.   Continued...