OTTAWA (Reuters) - Canadian job growth surged in December as full-time employment finally rebounded, turning concern about a weak labor market on its head and raising hopes the economy may have turned the corner after two years of pain caused by low oil prices.
Employers added 53,700 jobs in December and 214,000 in 2016 as a whole, the best annual growth since 2012, bucking market expectations for a month without job growth in a year where part-time and lower-quality jobs dominated employment.
December’s gains included a jump of 81,300 full-time jobs, were in sectors considered high-quality, and came even in regions where the long slump in oil prices had taken a toll - all qualities that should reassure the Bank of Canada that the long economic malaise may be over.
“Certainly the Bank’s going to take some comfort from that ... with these employment gains there will be no pressure to cut rates and we’ll see whether this hiring starts encouraging stronger expenditure,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.
Canada’s central bank cut interest rates two times in 2015 in a bid to revive the struggling economy, and has held borrowing costs steady in 2016 even as its U.S. counterpart, the Federal Reserve, began what is expected to be a series of rate hikes to hold U.S. inflation in check as that economy grows.
Signs that Canadian employment is finally turning a corner boosted the Canadian dollar to C$1.3216 to the U.S. dollar, or 75.66 U.S. cents. That was up from C$1.3268, or 75.37 U.S. cents, before the report’s release.
The jobs report was accompanied by separate trade data showing the first trade surplus in more than two years in November, suggesting exports are finally picking up steam as the U.S. economy strengthens.
Canada’s central bank has been hoping the manufacturing and export sector can help take up the slack from a cooling housing market, one of the few recent areas of strength, as the nation waits for the energy sector to recover.
Economists said the surprisingly strong employment and export data should bolster broader economic growth in 2017, but the jobs data in particular is notoriously volatile, and signs of slack in the labor market remain.
“While economic growth is expected to pick up, that’s not to say employment gains will be stellar in 2017. Canadian firms may want to limit costs as to restore profit margins after two difficult years,” said Krishen Rangasamy, senior economist at National Bank Financial.
The gain in jobs at a time the economy is growing only slowly also suggests productivity is lagging, a demographic challenge faced by many Western nations with aging workforces and employers skittish about capital investment.
“Even allowing for the surge in exports in November, the decline in October monthly GDP suggests that fourth-quarter GDP growth was no more than 1 percent annualized. If both are correct, that must mean Canada is experiencing a big slump in productivity,” said Paul Ashworth, chief North American economist at Capital Economics.
Additional reporting by Solarina Ho, Matt Scuffham and Susan Taylor in Toronto and Andrea Hopkins in Ottawa; Editing by Jeffrey Benkoe and Paul Simao