(Reuters) – Canada posted a blockbuster job gain in February, easily beating expectations and more than wiping out January’s decline, while the unemployment rate dropped below its pre-pandemic level for the first time, data from Statistics Canada showed on Friday.
The economy added a net 336,600 jobs, more than double the 160,000 analysts had forecast, Statscan said. The jobless rate fell to 5.5%, its lowest level since 5.4% in May 2019, as Canada reopened from strict Omicron restrictions.
Hours worked surged 3.6%, rising above February 2020 levels for the first time, with the average hourly wage of permanent employees up 3.3%. Overall, employment is now 1.9% above pre-pandemic levels.
“We were expecting strength, but not nearly as much as that,” said Jimmy Jean, chief economist at Desjardins Group.
“Canada has a history of a very resilient job market coming out of those (COVID-19) waves… You have a lot of jobs and that will allow consumers to be able to absorb the impact of higher inflation, especially with wages accelerating.”
Graphic: Canada net jobs losses or gains by month: https://graphics.reuters.com/CANADA-ECONOMY/EMPLOYMENT/klvykbrjevg/chart.png
The blowout gain comes as the Bank of Canada is widely expected to go ahead with second rate hike at its next meeting in April. Chances of a 50-basis-point hike edged up to 45% from 37% before the report, money market data showed.
Governor Tiff Macklem last week said the central bank has “considerable space” left to raise rates and did not rule out a 50 bps move if needed to curb surging consumer prices. Inflation hit a 30-year high in January at 5.1%.
While job market strength boosts the chance of a more aggressive hike going forward, it is not likely to happen in April, with too much uncertainty clouding the outlook, said Doug Porter, chief economist at BMO Capital Markets.
“I think they would need to see a little bit more clarity on the situation in Ukraine, and global financial markets in general, before they took an aggressive step,” he said.
“Let’s just say their finger is going to be on the 50-basis-points trigger now when conditions allow.”
The Canadian dollar was trading 0.4% higher at 1.2710 to the greenback, or 78.68 U.S. cents.
(Reporting by Julie Gordon in Ottawa and Ismail Shakil in Bengaluru; Additional reporting by Fergal Smith in Toronto; Editing by Alison Williams and Chizu Nomiyama)
