June 4, 2010 / 11:23 AM / in 7 years

Job gains larger than expected in May

OTTAWA (Reuters) - Canada added 24,700 jobs in May, almost double the expected number, as the economy posted its fifth consecutive monthly increase in employment, Statistics Canada data indicated on Friday.

Analysts had predicted an increase of 12,500 jobs after April’s record gain of 108,700 positions. The unemployment rate remained at 8.1 percent in May, matching market forecasts.

Matthew Strauss, currency strategist at RBC Capital Markets, said the report was strong and could persuade the Bank of Canada to raise rates again next month.

The Bank lifted its key rate by 25 basis points on Tuesday but said it would look very carefully at economic conditions before hiking it again.

“The (Bank) was saying they are going to pay a lot of attention to incoming data and this would further suggest we could likely see another 25 basis point hike in July,” said Strauss. The bank’s next interest rate announcement will be on July 20.

The Canadian dollar briefly firmed to a session high of C$1.0352 to the U.S. dollar, or 96.60 U.S. cents, from C$1.0379 just before the data, but then weakened to a session low of C$1.0447.

Statscan said full-time employment increased by 67,300 in May, offsetting a loss of 42,500 part-time jobs. The private sector added 43,400 positions while the public sector notched a more modest gain of 9,400.

Since the labor market began recovering last July, 310,000 workers have been added to payrolls -- still short of the 417,000 jobs lost between October 2008 and July 2009.

“Another stronger than expected Canadian jobs report. I guess we shouldn’t be too surprised -- it’s getting to be the norm,” said Sal Guatieri of BMO Capital Markets.

“It’s kind of surprising that the Canadian dollar weakened on the report. If anything, this report pushes the Bank of Canada another step closer to tightening policy in July.”

The average hourly wage of permanent employees, watched by the Bank of Canada for inflation pressures, rose 2.7 percent in May from a year earlier, up from the 2.3 percent year-on-year increase recorded in April.

Reporting by David Ljunggren, Editing by Chizu Nomiyama

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