OTTAWA (Reuters) - Canada added far more jobs than expected in June, data showed on Friday, sending the Canadian dollar to a nearly 10-month high and raising expectations that the Bank of Canada will hike interest rates next week.
The economy added 45,300 jobs last month, Statistics Canada said, topping forecasts for a gain of 10,000. The unemployment rate dipped to 6.5 percent, its lowest since April, even as more people were looking for work.
The details were somewhat mixed, with part-time jobs rising by 37,100 and accounting for the bulk of the hiring gains. Full-time employment rose by 8,100.
But economists were more focused on the strength the labor market has shown over the past several months as the economy has recovered from the hit it took from cheaper oil prices two years ago. Since last June, employers have added 350,800 jobs, with 248,200 of those full-time.
With the economy improving, Bank of Canada policymakers have taken a more hawkish tone. Markets are increasingly betting on a rate hike after the central bank’s next meeting on Wednesday.
“The strength in labor markets, with no indication of any kind of pullback, leaves the Bank of Canada poised to start tightening policy later this month,” said Royal Bank of Canada assistant chief economist Paul Ferley.
The Bank of Canada lowered rates twice in 2015 to cushion the blow from the oil price shock and has since left them at 0.50 percent. Top policymakers have said in recent weeks that those cuts have done their job, laying the groundwork to move rates higher.
Market odds of a rate increase next week rose to 90.6 percent from 86.5 percent just before the report was released, while the Canadian dollar strengthened to a nearly 10-month high against the greenback.
The service sector led June’s jobs gains with 29,200 new jobs, including 27,000 professional, scientific and technical services positions, as employers hired more computer system designers.
Hiring also rose in the healthcare, public administration and accommodation industries. Goods producers added 16,000 jobs, with gains in agriculture and manufacturing.
Still, economists said there was no sign of wage pressure, with average hourly earnings up 1 percent from a year earlier, matching May’s pace.
Still, the Bank of Canada probably believes it is only a matter of time before wages start to firm, said Scotiabank economist Derek Holt.
Additional reporting by Matt Scuffham and Solarina Ho in Toronto; Editing by Jeffrey Benkoe and Lisa Von Ahn