January 6, 2010 / 2:57 AM / in 8 years

Canada seen adding 20,000 jobs in December

WHAT: Canadian December employment report

WHEN: Friday, January 8 at 7 a.m. (1200 GMT)

REUTERS FORECAST: The median forecast is for a net gain of 20,000 jobs in the month, following an unexpectedly strong 79,000-job gain in November. Forecasts range from -17,000 to +40,000.

The median forecast for the unemployment rate is 8.5 percent, unchanged from the previous month. Forecasts range from 8.4 percent to 8.7 percent.

FACTORS TO WATCH: Canada’s labor market has been improving at a faster pace than that of the United States, which confirms economists’ expectations that domestic demand, in particular consumer spending, will fuel the economic recovery. A strong employment gain in December would cement that view while any unexpected job losses would cast doubts over the newfound stability of the economy.

The labor force survey tends to be volatile from month to month and is best looked at as an average over several months. The average job gain over the six months to November was 7,000 per month. Unlike in the United States, there is no additional, complementary data on the labor market to feed into forecasts, so analysts tend to be conservative in their predictions and are frequently off base.

In recent months, some upbeat headline job numbers have masked the fact that a tough job market has led many to turn to self-employment or part-time jobs, and that the government is creating jobs while private sector hiring -- the true measure of economic recovery -- has been flat. Analysts will scrutinize the details for evidence of good quality, permanent jobs in expanding sectors of the economy.

Exporters and manufacturers have been hardest hit by the recession and job recovery has been slower in those industries than in the services sector, where employment has recovered to October 2008 levels. Markets will be heartened by job gains in the goods sector, where there are still 324,000 fewer jobs than in October 2008.

MARKET IMPACT: A second straight month of stronger than expected job gains in December could trigger a rally in the Canadian dollar, which is already getting a lift from rising oil prices, on expectations that growth will be stronger than anticipated.

Job losses or tepid gains could spark a selloff on fears of a double-dip recession.

Markets largely expect the Bank of Canada to hold its key interest rate at its lower limit of 0.25 percent until mid-year, unless inflation suddenly appears headed to soar past 2 percent this year.

Reporting by Louise Egan; editing by Rob Wilson

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