Credit Herald

OTTAWA–Canada’s economy burst out of the gate in January, creating 46,400 new jobs and sending the unemployment rate tumbling to 5.8 per cent from a revised 6 per cent in December.

The surprisingly strong job creation – market analysts had predicted a 10,000 gain – sent the Canadian dollar shooting above parity. It closed at $1.0002 (U.S.), up 1.09 cents, and traded as high as $1.0049 earlier in the day.

"Just when we thought that Canadian employment was finally showing signs of slowing down, January’s employment numbers bust through expectations once again," said Toronto Dominion Bank economist James Marple.

"January’s labour force survey points to an economy that has continued to chug along even as the U.S. teeters on the brink of recession."

The jobs advance countered expectations that a stalling economy would slow the impressive job creation of recent years.

December had shown a job-market contraction of about 18,000 jobs, and last month the Bank of Canada revised its expectations for first-quarter economic growth to a rate of 0.6 per cent.

Canada Mortgage and Housing Corp. also reported yesterday that housing starts jumped in January, at an annual rate of 222,700 units, up from 184,700 in December.

And Statistics Canada said wage growth continued strong, with a year-over-year rise of 4.9 per cent for January – double the 2.4 per cent inflation rate.

"It’s a little too early to say definitely, but on the data you have to say there’s a good chance the Canadian economy will hold up pretty well to the U.S. slowdown," said BMO economist Douglas Porter.

"In hindsight, it looks like December’s very weak data was caused by the bad weather, and if you combine the two months, we had about 30,000 jobs growth, which shows we’re slowing down but still doing okay."

The economy produced jobs last month in a wide array of industries, with professional and technical services and construction leading the way.

As well, most new jobs were full-time and in the private sector.

Even manufacturing, which has been in a deep slump, edged up in January by creating 17,500 jobs, although over the past year the sector remains 113,000 in the hole, with most of those lost jobs in Ontario and Quebec.

Offsetting the gains were losses in retail and wholesale trade and in the information, culture and recreation sector.

The Canadian dollar gained as the economic data cast doubt on how fast the Bank of Canada will cut interest rates payday loans application. Many economists had forecast the bank would slice rates by half a percentage point in March, but Porter said the urgency may have evaporated.

TD’s Marple continues to expect a half-point cut, but said the unrelenting strength in wage growth presents a concern on an otherwise benign inflation front.

"Still, we expect that this report was more of a blip than a sign of renewed strength in Canada’s labour market."

Other economists said that December may have been the blip, saying the continued rise in wages bodes well for the economy, even if it will grow at a slower pace than last year.

"We’ve had growth in hourly wages at over 4 per cent for six straight months," said Meny Grauman of CIBC World Markets. "That definitely is a plus for Canadian consumers and shows the internal dynamics of the economy are still quite good."

Statistics Canada had first reported December’s jobless rate at 5.9 per cent but revised it up to 6.0, making January’s advance in jobs even more surprising.

Private-sector employment rose by a strong 77,000 in January, bucking the recent trend of strong public-sector job growth and weak non-governmental employment gains.

Most provinces saw their unemployment rate fall in January, with Quebec setting a 33-year low with a jobless rate of 6.8 per cent. Ontario’s jobless rate fell to 6.3 per cent, although Canada’s most populous province remains a weak point on the job creation front, rising only 1.5 per cent over the past year.

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