OTTAWA – Employment in Canada surged for a second-consecutive month in June and the unemployment rate fell, capping off the best quarter of job creation in seven years and setting the stage for a widely anticipated interest-rate increase next week from the Bank of Canada.
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The Canadian economy added a net 45,300 jobs in June, Statistics Canada said Friday. Market expectations were for a gain of 10,000 positions, according to economists at Royal Bank of Canada.
On a year-over-year basis, Canadian employment increased 350,800, or 1.9%, which marks the fastest annual rise in job growth since February 2013. Over two-thirds of the new jobs created over the past 12 months were full-time positions.
For the second quarter, employment rose 103,000, representing the biggest quarterly increase since 2010.
Meanwhile, the unemployment rate fell to 6.5% in June from the previous month's 6.6% level. When using U.S. Labor Department methodology, Canada's jobless rate in June was 5.4%.
Financial markets responded positively to the labor data. The Canadian dollar shot higher, touching a fresh 10-month high. The U.S. dollar was trading recently at C$1.2896 from C$1.2973 right before the release of the report and C$1.2977 late Thursday, according to data provider CQG.
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Meanwhile, Canadian bonds continued to sell off, as the jobs report gave investors more confidence about an imminent Bank of Canada rate increase. The two-year bond was yielding 1.154% from 1.139% late Thursday, while the 10-year bond was yielding 1.869% from 1.833%, according to CanDeal. Bond prices move inversely to yields.
The U.S. nonfarm payrolls report for June, released at the same time, showed the creation of 222,000 jobs from the prior month. The unemployment rate ticked up to 4.4% from 4.3% the prior month as more people joined the workforce, the U.S. Labor Department said Friday.
Canada's June report, following a 54,500 employment gain in the previous month, will likely reinforce already heightened expectations for a Bank of Canada rate rise on Wednesday -- the first increase in the central bank's benchmark lending rate in seven years. The rate rise would come amid signs of a firming economy following a prolonged slump fueled by the commodity-price shock that began in mid-2014.
Gross domestic product rose at a 3.7% annualized rate in the first quarter, making Canada the best-performing economy among Group of Seven countries in early 2017, and it is on track for second-quarter expansion of roughly 2.5%.
A quarterly survey of firms conducted by the Bank of Canada and released last week indicated executives expect sales prospects to improve over the 12 months, while hiring intentions hit a record level with two-thirds of firms signaling an increase in payrolls in one year's time.
"In sum, the jobs market is tightening, and not that far from what historically has been judged as full employment," said Avery Shenfeld, chief economist at CIBC World Markets. He said the jobs report "cements the case" for a Bank of Canada rate rise on Wednesday.
The one drawback in the jobs report is wage growth. Average hourly pay rose 1.3% from a year ago in June, data showed, matching the annual advance recorded in the previous month. The Bank of Canada has cited subdued wage growth as a source of concern.
Meanwhile, the bulk of the net new jobs created in June were part-time, 37,100, versus the addition of 8,100 full-time positions. In the April-to-June period, just over half the jobs added were full time, which tend to pay higher wages and provide better benefits compared with part-time positions.
Firms and organizations added 23,900 workers in June, while the ranks of the self-employed -- generally independent contractors -- rose 21,400.
On a sectoral basis, the goods-producing component of the economy added 16,000 net new jobs, while the services sector created 29,200 positions.
David George-Cosh contributed to this article.
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(END) Dow Jones Newswires
July 07, 2017 10:46 ET (14:46 GMT)