April 10, 2015 / 2:08 PM / in 3 years

WRAPUP 1-Canada's surprise jobs gain gives central bank breathing space

OTTAWA, April 10 (Reuters) - The Canadian economy unexpectedly added 28,700 jobs last month due to a surge in part-time positions, an increase that reinforced expectations that the central bank will not move to cut interest rates further next week to stimulate growth.

Statistics Canada also said on Friday the unemployment rate stayed steady at 6.8 percent in March.

Although most economists had forecast no jobs gain last month, the employment picture was not as robust as the figures suggest. The gain came from 56,800 new part-time positions, the biggest increase in part-time jobs since July. Employers cut 28,200 full-time jobs.

Nevertheless, economists cheered that fact that there was any jobs growth in an economy that has been hit hard by the sharp drop in the price of oil, a major export.

“It was a mixed bag overall, which, frankly, given some of the challenges the Canadian economy has faced at the start of the year, is not a bad outcome,” said Doug Porter, chief economist at BMO Capital Markets.

The Canadian dollar pared losses against the greenback after the report was released. The data also firmed up forecasts that the Bank of Canada will hold rates at 0.75 percent when it announces policy next week after it shocked markets with a 25 basis point cut in January.

“I don’t think you can cut rates at this point in time,” said Stefane Marion, chief economist at National Bank Financial. “Do you need more insurance policy at this point in time? I don’t think so.”

The central bank has said the impact of oil’s drop might be most severe at the start of the year and Governor Stephen Poloz recently said first-quarter economic growth will look “atrocious”.

The jobs gain was predominantly in the services sector, with retail and wholesale trade leading the way. The sector added 19,800 jobs, the first gain since October.

The natural resources sector, which includes oil and gas extraction, added 6,300 positions after losing 26,000 jobs over the previous two months. In oil-rich Alberta, employment was little changed.

There was a 12,100 drop in construction jobs and a loss of 2,400 manufacturing positions.

The labor participation rate edged up to 65.9 percent from 65.7 percent. For the first quarter, 63,000 jobs were added as a result of part-time work.

A separate report showed housing starts rising to 189,708 units in March after slowing the month before. (Additional reporting by Andrea Hopkins, Alastair Sharp and Susan Taylor in Toronto; Editing by Peter Galloway)

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