Canada economy creates surge of jobs in June

Fri Jul 9, 2010 7:48am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's economy created far more jobs than expected in June in a surprising sign of strength after a raft of discouraging data, fueling expectations the central bank will hike interest rates again this month.

Statistics Canada said on Friday employment surged by 93,200 in June, adding to gains to nearly make up for the 417,000 jobs lost during the country's recession.

Analysts in a Reuters poll had predicted an increase of 15,000 jobs after a moderate gain in May of 24,700 positions.

The unemployment rate in June fell unexpectedly to 7.9 percent from 8.1 percent, the lowest since January 2009 but still well above the pre-recession level of 6.2 percent.

Rising employment increases the chance the Bank of Canada will raise its key interest rate on July 20 for a second time in a row, analysts said.

"I think it just reinforces our call that they are going to go 25 basis points," said Benjamin Reitzes, economist at BMO Capital Markets.

"While the GDP numbers for April weren't that great, the ongoing strong job numbers just give you more encouragement that the ongoing Canadian growth remains solid, and I guess that means that extremely low rates aren't necessary as maybe they were a year ago," he said.

The bank raised rates on June 1 to 0.5 percent from an emergency low of 0.25 percent, becoming the first among the Group of Seven industrialized nations to start tightening monetary policy after the financial crisis.   Continued...

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