Canada's economy created far more jobs than expected in December, defying expectations amid sluggish growth and affirming the possibility of a central bank rate hike this year.
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MARK CHANDLER, HEAD OF CANADIAN FIXED INCOME AND CURRENCY STRATEGY AT ROYAL BANK OF CANADA
"The fact that there's minor disappointment in the U.S. numbers took some of the risk aversion impetus for the Canadian dollar off. As well, as good as these numbers were, and have been over the last couple of months, there is still a sense that the levitation act on jobs can't continue for much longer. There's still some doubt cast around these numbers even though they look solid in all the details."
"In the second half of the year, growth looks to have averaged about 1 percent if we're lucky ... and the jobs gains we've had ... are simply inconsistent with the GDP numbers. One of those is at odds."
"Canada's had this experience before, where we've had a stretch of seemingly inconsistent employment numbers for a good period, three to four or five months, so that's one of the reasons the Bank of Canada would put some question marks around this. The second factor would be simply that they don't have the same mandate as the Fed. Ours is an inflation-targeting central bank and inflation's been below what they had been thinking."
DOUG PORTER, DEPUTY CHIEF ECONOMIST, BMO CAPITAL MARKETS:
"My initial response is not only are they defying expectations, they are defying gravity. Right across the board, this is a very strong result. It is very tough to reconcile this with a lot of the other indicators we are seeing on the economy, but we have to accept the numbers as presented. Almost every aspect of this report was strong -- most of the gains were in full-time, private-sector employment, a lot were in the goods-producing sector. Even the expected reversal in the accommodation and food services didn't happen, so this is quite the surprise -- quite the pleasant surprise."
"The Bank (of Canada) responds to a whole series of events and they've been less focused on the job market than say the Fed would be, but still, I think the decline in the unemployment rate to a new cycle low 7.1 percent will catch their eye. It also hints that there is a bit more strength to the underlying economy than the latest GDP numbers would suggest. But with inflation running at less than 1 percent and GDP in the 1 percent zone recently, I don't think the Bank will be in any rush to do anything. But it likely means they'll keep a mild hawkish bias in place."
"The U.S. data are a slight disappointment. If we had a combination of both a strong Canada and strong U.S. the Canadian dollar would be absolutely flying right now. We're seeing a bit of caution because the U.S. data were a touch underwhelming. But overall the Canadian numbers are certainly supportive for the dollar."
CAMILLA SUTTON, SCOTIABANK CHIEF CURRENCY STRATEGIST
"Very strong across the board, well above consensus. All the job gains were in full-time and the private sector, and the split between goods to services was good ... So all-in-all the details of the report were just as strong as the headline and that is positive for the Canadian dollar."
"Already the market was pricing in about a 25 percent chance that the Bank of Canada would hike rates in 2013 and I think it keeps that type of expectation engrained. So it's likely that we do see higher rates in Canada at the very end of 2013 to early 2014."
- The Canadian dollar jumped to a session high against its U.S. counterpart after the data. The Canadian currency was trading at C$0.9876 to the greenback, or $1.0126, compared with C$0.9880, or $1.0121, at Thursday's North American close.
- Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that traders increased bets on a rate hike in late 2013 after the employment reports.
(Reporting by Andrea Hopkins, Julie Gordon and Alastair Sharp; Editing by Jeffrey Hodgson)