Canada caps record jobs year as monthly gain doubles estimates

Bloomberg

Canada’s labour market beat expectations in December, a strong end to a record year for employment gains.
Employment rises 54,700 last month, Statistics Canada reported in Ottawa. That’s more than double the 25,000 gain economists were predicting in a Bloomberg survey. Full-time jobs actually surged by 123,000, as many part-time workers shifted to more permanent employment — another sign of strength.
The reports add to evidence economic conditions were strong in the final weeks of 2021, before the country was hit by a wave of Covid-19 cases and fresh lockdowns. The nation created 886,000 new jobs for all of 2021, a record year. After losing 3 million jobs at the start of the pandemic, employment is now 240,500 above where it was in February 2020.
The combination of a weak US payrolls report and the strong Canadian number sent the loonie on a ride. The Canadian currency initially jumped about a third of a cent to as high as C$1.268 per US dollar, before giving up those gains to trade at C$1.2718.
The number put further pressure on bonds, with Canada 10-year yields jumping to 1.736% — the highest since late November.
The data will only cement expectations that interest rates are poised to increase very soon. Markets are pricing in five Bank of Canada rate hikes this year, beginning as early as this month when policy makers make their first decision of 2022 on January 26.
While bank officials have pledged not to raise borrowing costs until the labor market has fully recovered, there’s little in the data that suggests there’s much slack left.
“Strong data more likely prompts the BoC to open the door for a March hike, rather than start in January while over half the country is in lockdown,” Benjamin Reitzes, macro strategist at Bank of Montreal, said by email.
The percentage of the population employed — at 61.5% — is just under pre-pandemic levels. So are participation rates, with little sign of long-lasting damage to the economy from the widespread lockdowns and closures last year, at least in aggregate.
Public sector employment was a big factor behind the gain, rising by 31,600 in December. The number of employees in the public sector was 307,000 above pre-pandemic levels.
The country created 27,100 construction jobs in December, the first gain since August.
To be sure, the emergence of the Omicron variant will hamper the expansion at the start of this year. Canada has seen an exponential rise in Covid-19 cases in recent weeks, prompting authorities to start shutting down high-contact sectors late last month.
The impact of those restrictions won’t be reflected in the data until January numbers are released next month, since
the December survey was taken between December 5-11.
But economists are still anticipating a strong 2022, with the jobless rate expected to fall to an average of about 5.8%, according to estimates in a Bloomberg News survey last month. That would bring it near five decade lows.