OTTAWA (Reuters) - Canada’s ailing jobs market sprang back to life in March with a stunning 82,300 net new jobs, the most since September 2008 and a tentative sign that the economy may be growing enough muscle to pressure the central bank to raise interest rates.
The job gains reported by Statistics Canada on Thursday were eight times bigger than expected, and were spread fairly evenly across several sectors. Strong private-sector hiring and more full-time positions suggested underlying economic strength.
“Hibernation is over for Canadian employment. After a lengthy lull it’s come roaring back with a rather incredible gain,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The jobless rate in the month dipped to a six-month low of 7.2 percent from 7.4 percent in February, more than 1 percent below the comparable U.S. rate.
The news pushed the Canadian dollar higher against the U.S. dollar.
Other economic data on Thursday showed that fewer residential building permits were issued in February, which may signal that Canada’s hot housing market, a source of concern for policymakers, is cooling. The overall value of building permits in the month, however, jumped 7.5 percent from January on strength in nonresidential sectors.
Another indicator showed the pace of corporate purchasing activity in the economy in March remained positive, with the Ivey index dipping to 63.5 from 66.5 in February. Any figure above 50 in the index shows growth.
Even though Canada had recovered all the jobs it lost during the recession by early last year, employment growth had stalled over the past six months and began underperforming that in the United States for the first time since the 2008-09 recession.
The March data suggests that may no longer be the case.
“I think the biggest fear about Canada is that we had front-loaded the recovery or the expansion, and that things were beginning to dwindle. Now it really does throw an important hole in that argument,” said Camilla Sutton, chief currency strategist at Scotia Capital.
It’s too early to declare March a turning point, though, as monthly data can be volatile and no trend will be apparent for a few months. Unusually mild weather in March may have led to more hiring in some industries, analysts said.
Furthermore, big jobs cuts in the federal public service will be reflected in upcoming months as the Conservative government’s new wave of fiscal restraint hits 19,200 jobs over three years. The government said the proposed reductions represent 0.1 percent of all jobs in Canada and that job growth elsewhere will more than compensate.
Several hundred job cuts have already been announced for the current year, although it’s not clear exactly when they will take effect.
So far, analysts are sticking to their predictions that the central bank will hold its key interest rate steady at 1.0 percent until next year. Bank of Canada Governor Mark Carney sounded a bit more hawkish in remarks on Monday, painting a less scary picture of the global economic backdrop and noting that domestic growth has been somewhat stronger than anticipated.
“This follows hard on the heels of some tougher talk from the Bank (of Canada) so I think it is just going to increase the chatter that the bank may be going earlier than the market had expected,” Porter said.
Traders raised their bets on the possibility of central bank rate hike later this year following the jobs report.
Most of the hiring in March took place in service industries which added 57,500 to payrolls, led by health care and social assistance and information, culture and recreation.
The goods-producing sector added 24,900 jobs, helped by manufacturing and construction.
Additional reporting by Jennifer kwan, Jon Cook and Andrea Hopkins; Editing by Peter Galloway