January 27, 2012 / 2:42 PM / 6 years ago

Canada to kick off year with stronger job growth

OTTAWA (Reuters) - Canada should see modest job growth in January after an unexpected lull in late 2011 as manufacturers and retailers rebuild staff, but not enough to pull down the unemployment rate, according to a Reuters poll of analysts.

The median forecast was for the economy to generate 23,100 net new jobs, up from 21,700 in December. But the jobless rate is seen remaining at 7.5 percent.

“The weakness in the fourth quarter seemed out of line with our sense that although GDP growth slowed in the quarter, it continued to expand ... It just seemed the weakness was overstated, and so we think we’ll see a bit of a bounce back in 2012,” said Paul Ferley, assistant chief economist at RBC.

The economy is forecast to have grown by 2 percent in the final quarter of last year on an annual basis, down from 3.5 percent in the previous quarter.

Canada’s job market recovered more quickly from the recession than that of the United States, and the unemployment rate remains lower. But for the first time in five years it no longer leads the U.S. in employment creation.

Statistics Canada’s revisions to three years’ worth of employment data, released on Friday, showed there were about 19,000 fewer job losses in the fourth quarter than originally reported but overall the job market was still weak.

Analysts are betting the services sector will see a turnaround in January, after two months of employment declines that likely reflected weaker than usual hiring by retailers in the holiday season. Factories may churn out more jobs for a second straight month, helped by recovering demand in the United States for cars and other goods.

Forecasters are also taking heed of a trend seen in 2011 and 2010 whereby companies front-loaded their hiring in the first half of the year, leveling out or even stagnating in the second half.

Even if the predictions are true and 2012 kicks off on a positive note, the European debt crisis and its potential fallout are hanging over employers and may restrain hiring decisions for months to come.

“All the easy job gains have already been achieved in Canada and it does stand out as one of the only economies in the advanced world to have reclaimed all the job that were lost,” said David Tulk, chief macro strategist at TD Securities.

“Now, the next impetus to push higher requires a stronger international backdrop and I don’t think we’re quite there yet. Its jut a bit of fatigue on the part of employers,” he said.

Reporting By Louise Egan; editing by Rob Wilson

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