Canada jobs gain boosts talk of rate hike pressure

Fri Jun 4, 2010 11:56am EDT
 
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By David Ljunggren

OTTAWA (Reuters) - Canada added almost double the number of jobs expected in May, prompting analysts to predict the Bank of Canada will come under more pressure to raise interest rates again next month despite rocky global markets.

Statistics Canada said on Friday that employment rose by 24,700 positions in May compared with the expected gain of 12,500. A record 108,700 new jobs were created in April.

"This should up the ante on further Bank of Canada hikes. This is simply an astounding jobs report," said Derek Holt of Scotia Capital.

Canada became the first member of the Group of Seven industrialized nations to raise rates when the Bank of Canada lifted its key rate by 25 basis points this week to 0.50 percent.

The central bank, whose next rate announcement will be on July 20, said it would weigh domestic and global developments carefully before acting again.

"The (bank) was saying they are going to pay a lot of attention to incoming data and this would further suggest we could likely see another 25 basis point hike in July," said Matthew Strauss, currency strategist at RBC Capital Markets.

The unemployment rate remained at 8.1 percent in May, matching market forecasts.

Shortly after the jobs data, yields on overnight index swaps -- which trade based on expectations for the Bank of Canada's key policy rate -- mostly edged higher, showing the market saw tightening as slightly more likely.   Continued...