gipa69
collegio dei patafisici
Canada jobs gain shocks
Fri Jun 9, 2006 9:03 AM EDT
By David Ljunggren
OTTAWA (Reuters) - The Canadian economy added 96,700 jobs in May, more than six times the number forecast, in a jobs report that "blew the roof" off expectations and brought back the prospect of another Bank of Canada interest rate hike in the coming months.
Statistics Canada said on Friday the huge rise in the number of new jobs pushed down the unemployment rate to a 31-year low of 6.1 percent. Economists had forecast an increase of only 15,000 jobs with the jobless rate unchanged from 6.4 percent.
With job gains figures so startling, some analysts expressed doubts about the accuracy of the data.
"It blew off the roof, that's the end of the story. If you take this at face value, Canada's job market is absolutely smoking," said Marc Levesque, chief strategist at TD Securities.
The massive employment increase immediately renewed expectations that the Bank of Canada, which has raised rates seven consecutive times and had signaled it would shift to the sidelines, would have to act again.
The Canadian dollar shot up and Canadian bond prices tumbled as the market started pricing in the prospects of another 25 basis point rate hike.
The currency rose to C$1.1108 to the U.S. dollar, or 90.02 U.S. cents, up sharply from C$1.1198, or 89.30 U.S. cents, before the jobs data. It began paring back gains after the release of April trade data, which showed a big drop in Canada's surplus.
A Reuters poll last month, before the central bank raised rates by 25 basis points on May 24, indicated nearly all of Canadian primary bond dealers expected the bank to stand pat rates on July 11 and pass again in September.
Canada's key overnight rate stands at 4.25 percent, while the comparable U.S. federal funds rate is 5.0 percent.
"This is not a number that you ignore ... The market's reaction now will basically be toward the possibility of another 25 basis points rate hike in the next announcement," said Benjamin Tal, senior economist at CIBC World Markets.
Statscan said the main driver of the employment rise in May was a 150,800 increase in the number of a full-time jobs -- a record jump -- as new entrants to the market obtained full-time jobs. The economy shed 54,200 part-time jobs in May.
Levesque said he doubted the figures were accurate.
"This is completely, completely at odds with the pace of economic growth we're looking at. I think there's a big question mark on this," he said, noting the finance, insurance and real estate sector had added 31,000 jobs in May.
"The implication here is that somebody opened a new bank in Canada and staffed it. I have to be skeptical about the number," he added.
Statscan said the manufacturing sector, hit hard by the strong Canadian dollar, increased foreign competition and high energy prices, continued to struggle. It lost 21,700 jobs in May and has shed 70,500 since May 2005.
The jobless rate in December 1974 was 6.0 percent, but Statscan says differences in the way the figure is calculated now mean direct comparisons are difficult. The margin of error for May's data is 27,400 jobs.
"I would describe it as a positively shocking surprise," said George Davis, chief technical strategist at RBC Capital Markets.
Fri Jun 9, 2006 9:03 AM EDT
By David Ljunggren
OTTAWA (Reuters) - The Canadian economy added 96,700 jobs in May, more than six times the number forecast, in a jobs report that "blew the roof" off expectations and brought back the prospect of another Bank of Canada interest rate hike in the coming months.
Statistics Canada said on Friday the huge rise in the number of new jobs pushed down the unemployment rate to a 31-year low of 6.1 percent. Economists had forecast an increase of only 15,000 jobs with the jobless rate unchanged from 6.4 percent.
With job gains figures so startling, some analysts expressed doubts about the accuracy of the data.
"It blew off the roof, that's the end of the story. If you take this at face value, Canada's job market is absolutely smoking," said Marc Levesque, chief strategist at TD Securities.
The massive employment increase immediately renewed expectations that the Bank of Canada, which has raised rates seven consecutive times and had signaled it would shift to the sidelines, would have to act again.
The Canadian dollar shot up and Canadian bond prices tumbled as the market started pricing in the prospects of another 25 basis point rate hike.
The currency rose to C$1.1108 to the U.S. dollar, or 90.02 U.S. cents, up sharply from C$1.1198, or 89.30 U.S. cents, before the jobs data. It began paring back gains after the release of April trade data, which showed a big drop in Canada's surplus.
A Reuters poll last month, before the central bank raised rates by 25 basis points on May 24, indicated nearly all of Canadian primary bond dealers expected the bank to stand pat rates on July 11 and pass again in September.
Canada's key overnight rate stands at 4.25 percent, while the comparable U.S. federal funds rate is 5.0 percent.
"This is not a number that you ignore ... The market's reaction now will basically be toward the possibility of another 25 basis points rate hike in the next announcement," said Benjamin Tal, senior economist at CIBC World Markets.
Statscan said the main driver of the employment rise in May was a 150,800 increase in the number of a full-time jobs -- a record jump -- as new entrants to the market obtained full-time jobs. The economy shed 54,200 part-time jobs in May.
Levesque said he doubted the figures were accurate.
"This is completely, completely at odds with the pace of economic growth we're looking at. I think there's a big question mark on this," he said, noting the finance, insurance and real estate sector had added 31,000 jobs in May.
"The implication here is that somebody opened a new bank in Canada and staffed it. I have to be skeptical about the number," he added.
Statscan said the manufacturing sector, hit hard by the strong Canadian dollar, increased foreign competition and high energy prices, continued to struggle. It lost 21,700 jobs in May and has shed 70,500 since May 2005.
The jobless rate in December 1974 was 6.0 percent, but Statscan says differences in the way the figure is calculated now mean direct comparisons are difficult. The margin of error for May's data is 27,400 jobs.
"I would describe it as a positively shocking surprise," said George Davis, chief technical strategist at RBC Capital Markets.
