OTTAWA (Reuters) - The Canadian economy created 42,600 jobs in November, once again overshooting expectations in a sign of resilience to the turmoil in the U.S. housing sector and financial market disruption.
Statistics Canada said on Friday the strength was mainly due to private-sector hiring in the services sector and in natural resources. Manufacturing, hurt by a strong Canadian dollar and weaker U.S. demand for exports, continued its slump.
Despite the heavy hiring, the jobless rate ticked up to 5.9 percent from a 33-year low of 5.8 percent in October, as 67,600 people were lured into the labor force, pushing the rate of participation to a historic high.
The employment rate, which is the percentage of the working age population that is employed, hit a record high at 63.8 percent.
“This number is actually a fair bit stronger than it looks on the surface ... Most importantly, you’re actually seeing private sector job creation again. We really didn’t see much of that over the past eight months,” said Eric Lascelles, chief economics and rates specialist at TD Securities.
“On the one hand, yes, the U.S. economy is quite soft with downside risks and the credit crunch is ongoing, but boy, the Canadian dollar is not nearly as threatening as it was a while ago,” he said.
The November report followed three straight months of stronger-than-expected employment growth. In October, the economy added nearly six times the number of jobs forecast.
Analysts had forecast, on average, job gains of 10,000 in November and an unchanged unemployment rate of 5.9 percent.
The Canadian dollar jumped to C$1.0024 to the U.S. dollar, or 99.76 U.S. cents, from pre-data levels of about C$1.0104. The Toronto Stock Exchange’s main index rose 39.62 points, or 0.3 percent to 13,889.42.
Hourly wages of permanent employees, closely watched by the Bank of Canada for signs the tight job market may be fueling inflation, rose 4.1 percent in the year to November, slightly below the 4.2 percent in October but well ahead of consumer inflation of 2.4 percent.
The strong job market and the boost it gives consumer spending has made it difficult for the Bank of Canada to cut interest rates even though the economy is starting to drag its feet and the inflation rate has declined faster than expected.
The bank did cut its key overnight rate on Tuesday by one-quarter point to 4.25 percent. But it shied away from signaling any future cuts, suggesting that its January 22 decision on rates would hinge on economic data between now and then.
After three months of healthy job growth that was concentrated in the public sector, the November gains were mainly in the private sector, considered a more genuine reflection of economic growth. Most of the new jobs were full time.
Employment increases were strongest in four sectors, Statscan said. These were transportation and warehousing, business building and other support services, education and natural resources.
Bank of Canada Governor David Dodge has often said he is wary of reading too much into a single report, and economists continued to predict lower borrowing rates in 2008.
“I would suggest central banks don’t put nearly as much emphasis on the jobs report as markets do,” said Stewart Hall, market strategist at HSBC Canada. “(The bank is) data driven rather than predisposed necessarily to cut rates further.”
Canadian markets will also be eyeing indicators in the United States, which on Friday reported slightly better-than-expected nonfarm payrolls in November. The U.S. Federal Reserve is widely expected to cut interest rates by at least a quarter percentage point next Tuesday.
Additional reporting by John McCrank in Toronto; Editing by Peter Galloway