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Canada’s Unemployment Rate Plunges to Lowest in 40 Years
Source: ottawacitizen.com
Source Date: Friday, January 05, 2018
Focus: Citizen Engagement
Country: Canada
Created: Jan 08, 2018

Canada’s unemployment rate plunged to the lowest in more than 40 years, suddenly raising the odds of a Bank of Canada rate hike this month.

The jobless rate fell to 5.7 per cent in December, Statistics Canada said Friday in Ottawa, the lowest in the current data series that begins in 1976. The number of jobs rose by 78,600, beating expectations and bringing the full-year employment gain to 422,500. That’s the best annual increase since 2002.

The economy showed unexpected resiliency as the year came to an end, with the figures indicating rapidly diminishing slack in the labor market that may quicken the expected pace of interest-rate increases by the Bank of Canada. Since September, Canada added 193,400 jobs — the biggest three-month gain since at least 1976.

“The latest data in hand support a rate hike” in January, said Bill Adams, senior international economist at PNC Financial Services Group in Pittsburgh. “Broad-based growth is still the dominant theme.”

Canadian bond yields and the currency soared on the surprisingly strong jobs data. The loonie strengthened to 80.90 US cents, the strongest since September.

Bond prices plunged on expectations the jobs report may prompt the central to raise rates as early as this month. The yield on the two-year government of Canada bond jumped six basis points to 1.77 per cent, close to a seven-year high. The odds of a rate hike at the Bank of Canada’s next meeting on Jan. 17 soared to 70 per cent, from 40 per cent yesterday, based on trading in the swaps market.

The good news Friday wasn’t just relegated to the jobs market. Statistics Canada reported separately the nation’s exporters are beginning to exit from a months long slump, with shipments jumping by 3.7 per cent in November, the biggest one-month gain in more than a year.

While the current jobs data series begins in 1976, the jobless rate may be the lowest since 1974. According to the previous employment data series that ended in 1975, Canada had a jobless rate of 5.6 per cent in November 1974.

Both the employment and jobless rate figures beat the consensus economist forecast for a 6 per cent unemployment rate and 2,000 new jobs. PNC’s Adams had the closest prediction to the actual jobs gain, with a forecast for 24,000 new jobs.

The extent of the boom in Canadian jobs this year has largely caught policy makers and economists by surprise, given most have been anticipating an aging workforce to eventually become a drag on employment. Yet it seems the nation’s labor market had plenty of pent up supply, and much of it is rising to the surface as the economy continues to do well.

While most of the new jobs in December were part-time, the bulk of new hires in 2017 were full-time. The nation added 394,200 full-time jobs last year, the biggest gain since 1999.

The gains last year were led by services with 290,300 new positions. Goods-producers added 132,100 jobs, with an 85,700 increase in manufacturing that was the strongest since 2002.
Actual hours worked in December were 3.1 per cent above year-ago figures, the fastest since 2010.

And there are signs that wages — which had been stagnant for much of 2017 — are showing signs of accelerating. Wage gains for permanent employees accelerated to 2.9 per cent, from 2.7 per cent.

“The books closed on a phenomenal year for Canadian employment with another spectacular result for December,” Nick Exarhos, an economist at CIBC Capital Markets, said in a note to investors. “In our judgement, that should be enough to see the Bank of Canada hike rates later this month.”
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