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Canada stuns with biggest job gains in 11 years

Shadows are seen as a man walks down Bay Street in the financial district in Toronto, March 11, 2009. REUTERS/Mark Blinch
Shadows are seen as a man walks down Bay Street in the financial district in Toronto, March 11, 2009. REUTERS/Mark Blinch

By Louise Egan

OTTAWA (Reuters) - Canada's economy created a surprising 95,000 jobs in May, the biggest monthly gain in 11 years, and most were full-time positions and in the private sector, Statistics Canada said on Friday in a report showing the economy may be gaining momentum.

The stellar performance handily beat market expectations for a 15,000 gain and came after just 12,500 jobs were generated in April.

The May data brings the average monthly employment growth to 19,000 over the past six months, considered a more accurate reading because of the volatility of the labor force survey data. The jobs gain is well above the margin of error.

The unemployment rate ticked down to 7.1 percent in May from 7.2 percent.

The Canadian dollar jumped to its strongest level against the U.S. dollar since mid-May immediately after the data. The currency was trading at C$1.0186 to the greenback, or 98.17 U.S. cents, compared with C$1.0250 just before the jobs report and C$1.0260 at Thursday's North American close.

"Suffice to say, this comes as a surprise. I think that's probably one of the understatements of the year. This is one of the largest monthly increases in employment on record," said Doug Porter, chief economist at BMO Capital Markets.

"It really does change the picture for the job market. Instead of being mired in a prolonged period of weakness, it looks like the underlying trend in employment is still chugging along quite nicely," he said.

The report also comes as good news for the Conservative government, which is reeling from an expenses scandal but has tried to brand itself as a strong steward of the economy and public finances.

Finance Minister Jim Flaherty signaled late Thursday that he would be commenting on the jobs data later on Friday.

Some 76,700 full-time positions were added in the month and 94,600 jobs were in the private sector, Statscan said.

The construction sector did the most hiring, adding 42,700 jobs in May, followed by trade, "other services" and business, building and other support services. Sectors showing losses included manufacturing and professional, scientific and technical services.

Employment in recent months has been largely in line with tepid economic growth. But after a sluggish second half of 2012, rising exports helped revive growth in the first quarter to an annualized rate of 2.5 percent, the fastest in six quarters.

The Bank of Canada, which is expected to hold its key rate at 1 percent until late 2014, has forecast 1.8 percent growth in the second quarter and 1.5 percent growth in 2013 as a whole.

The employment statistics are based on a sample survey of representative households and are considered accurate only to within plus or minus 57,400, 19 times out of 20.

PRODUCTIVITY

In a separate report, Statscan said the labor productivity of Canadian businesses increased 0.2 percent in the first quarter, in line with expectations.

It was the second straight quarter of weak growth following three quarters of declines.

Canada has generally fallen behind the United States on productivity measures and in the first quarter that was the case, with U.S. labor productivity growing 0.5 percent.

Canadian business output expanded 0.7 percent in the first quarter while hours worked rose at a slower 0.5 percent pace.

Labor unit costs in Canada declined 1.8 percent when measured in U.S. dollars compared with a 1.3 percent decline for American businesses.

(Additional reporting by Alex Paterson and Solarina Ho; Editing by James Dalgleish)

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