Canadian employers hired six times more workers than expected in September, knocking down the unemployment rate for the first time since July 2008 in another sign the economy is rebounding from a deep recession.
Statistics Canada reported net job gains of 30,600 in the month, compared with the consensus forecast of a 5,000 increase and following gains of 27,100 in August. The jobless rate fell to 8.4 percent from 8.7 percent in August while analysts had expected it to rise to 8.8 percent.
The Canadian dollar rallied to a fresh one-year high after the report, touching C$1.0423 to the U.S. dollar, or 95.94 U.S. cents, up from around C$1.05 just before the release.
The data headily topped expectations, said Doug Porter, deputy chief economist at BMO Capital Markets.
Some of the strengths might be slightly overstated by seasonal factors but that doesn't seem to have played an overwhelming role here so I think there is some real underlying strength, he said.
Employment was still down 2.1 percent from a peak last October, even though the labor market has been largely steady since March of this year.
Still, the September gains affirmed the Bank of Canada's view that the economy will grow more sharply in the second half of this year than it had previously anticipated. The bank is not yet certain if that strength will extend into 2010 but will provide more detailed forecasts in an Oct. 22 report.
Economist Derek Holt of Scotia Capital said the two consecutive months of robust job gains suggest the central bank may forfeit its conditional pledge to keep rates at their historic low of 0.25 percent at least until the end of June 2010.
This is going to feed concerns about what to expect next from the Bank of Canada, given that this is the second consecutive set of decent numbers that we have had out of Canada, said Holt.
It's bullish for the Canadian dollar and would raise the market's concern about the (BoC) bringing forward anticipated rate hikes.
NO EXIT STRATEGY YET
Prime Minister Stephen Harper and his finance minister, Jim Flaherty, have both cautioned that the recovery will not be ensured until there is sustained jobs growth and have said they will not consider withdrawing any extra stimulus until then.
The biggest gains in September were in manufacturing, construction and educational services. However, Statscan said the net employment gains in September were all in the public sector while private sector employment actually lost 17,100 jobs, suggesting big private-sector losses outside manufacturing and construction.
Full-time employment jumped by 91,600 -- the largest jump since May 2006 -- while part-time employment decreased by 61,000.
Hourly wages for permanent employees, closely watched by the Bank of Canada for inflation trends, rose 2.3 percent in September compared with a year earlier.
Statscan said Canadians have been working more hours since April and at the same time, employment has edged down 0.2 percent from April to September.