Canada’s surprise jobs surge recoups all pandemic losses

Bloomberg

Canada has recovered all of the roughly three million jobs lost to Covid-19.
The country’s economy added 157,100 jobs in September, returning the labour market to pre-pandemic levels, Statistics Canada said in Ottawa. That compares with economists’ expectation of 60,000 new jobs, according to the median estimate in a Bloomberg survey.
The unemployment rate fell to 6.9% from 7.1% in August. Hours worked were up 1.1% in the month but remain 1.5% below their pre-pandemic level.
The Canadian dollar spiked, rising to C$1.2494 per US dollar in Toronto. That’s the highest level since August 5. Bonds sold off, with the two-year benchmark yield at 0.651%, highest level since March 2020.
The robust numbers are a
welcome sign for the nation’s economy. They suggest that companies are willing and able to hire workers as virus restrictions ease and as high vaccination rates boost optimism among consumers and businesses.

QE Implications
They will also bolster predictions by Bank of Canada officials that the economy will post a strong rebound after contracting earlier this year during a third wave of Covid-19 and business restrictions.
The strong report also reinforces the expectation that the central bank will taper its weekly purchases of Canadian government bonds to C$1 billion later this month from the current pace of C$2 billion, effectively halting the expansion of its balance sheet.
Also, the US posted weaker-than-expected jobs numbers, with employment rising by 194,000 or less than half of what economists had forecast. That complicates a potential decision by the Federal Reserve to begin scaling back monetary support before end of the year.
Canada’s job gains were driven entirely by full-time workers while part-time employment fell slightly. The increases were led by the public administration, information culture and recreation sectors. Around 139,000 people entered the labour force in September, bringing the participation rate to 65.5%, also the highest since before the pandemic.
“I think it reinforces the view that the second half of this year, fueled by the economic reopening that continues to occur and the lifting of some restrictions, except Alberta, will be somewhat strong,” Dominique Lapointe, an economist at Laurentian Bank, wrote by email. That’s “enough in the BoC’s view to taper another $1B per week in October and enter the reinvestment phase of its QE program.”
Meanwhile, Bank of Canada Governor Tiff Macklem said the economic recovery is on track despite disappointing output growth, but warned there’s a risk high inflation could prove more persistent than expected.
Gross domestic product suffered a shock contraction in the second quarter, and data since then suggest economic growth in the next three-month period will fall short of the central bank’s forecast for a 7.3% annualised gain.
Annual consumer price gains hit 4.1% in August, the highest since 2003 and the fifth consecutive month of inflation readings above the Bank of Canada’s 3% cap. Macklem will release a new set of forecasts for output and inflation at the bank’s October 27 policy decision, where it’s expected to taper its purchases of government bonds to C$1 billion ($796 million) a week from the existing pace of C$2 billion.