OTTAWA (Reuters) - The unemployment rate in Canada fell to the lowest level since January 2009 in May as the number of jobs increased by 22,300, an island of healthy data in a sea of recent figures showing tepid North American economic growth.
Statistics Canada reported on Friday that the jobless rate dropped from 7.6 percent in April to 7.4 percent in May, a number last seen when Canada was falling into recession at the start of 2009.
By contrast, the U.S. rate rose to 9.1 percent in May from 9.0 percent in April. That’s half a point more than the highest jobless rate registered in Canada during the economic slump: 8.6 percent in August 2009.
“The jobs numbers were reasonably comforting news amidst other data that showed the second quarter is going to be a disappointment,” said Avery Shenfeld, chief economist at CIBC World Markets.
“The only fly in the ointment was that the job gains were associated with self-employment, which can sometimes involve a smaller output gain associated with them.”
The number of self-employed rose by 29,500.
Full-time employment grew by 32,900. Private-sector employees rose by 37,100 and public-sector jobs fell by 44,300.
Statscan also reported that labor productivity rose by 0.4 percent in the first quarter from the previous quarter, less than half what analysts had expected. Canadian labor costs per unit of production, when calculated in U.S. dollars to show competitive pressures, rose 3.3 percent while U.S. unit labor costs only went up 0.4 percent.
HAPPY FOR A RISE AFTER APRIL‘S STRONG BOOST
The employment gain slightly exceeded the 20,000 jobs expected by analysts surveyed by Reuters.
“Any gains at all were impressive given that they came on the heels of an out-sized 58,000 prior-month tally,” Shenfeld said.
Besides the employment gain, another reason for the drop in Canada’s jobless rate was that fewer people were looking for work.
The shift from the public sector to the private sector is consistent with the Bank of Canada’s urging that growth start relying less on government stimulus spending and consumption and more on business investment and exports.
The Canadian dollar rose on the employment data but dipped after the productivity numbers were released 90 minutes later.
At 10:15 a.m., the currency stood at C$0.9774 to the U.S. dollar, or $1.0231. It had risen as high as C$0.9711, or $1.0298, just after the jobless report from Thursday’s North American finish of C$0.9731, or $1.0276.
Overnight index swaps, which trade based on expectations for the Bank of Canada’s key policy rate, showed that just after the data investors priced in slightly higher odds of tightening at policy announcements in September, October and December.
Expectations of tightening later weakened as commodity and stock prices tumbled more than 1 percent.
The Bank of Canada is widely expected to raise interest rates in September, according to a May 31 poll of primary dealers.
The job gains were led by the services sector, which went up by 37,200, especially in wholesale and retail trade.
The better-paying goods-producing sector fell by 14,900. Manufacturing, which was hit by supply-chain disruptions from the Japanese earthquake, lost 22,500 positions though it was still up 25,000 over a year earlier.
The construction industry, expected to be affected by a winding down of the government’s stimulus spending, was slightly up.
The average hourly wage of permanent employees, closely watched by the Bank of Canada for inflation pressure, rose 2.2 percent from a year earlier, compared with 2.4 percent in April.
“That means Canadians are not keeping up with inflation, such that real wages are flat to slightly lower. So despite the headline on jobs, that still remains a generally bearish indicator for near-term consumption,” said Scotia Capital economist Derek Holt.
Additional reporting by Howaida Sorour, Solarina Ho, Pav Jordan, Euan Rocha; editing by Peter Galloway