RBC: Canadian employment rises in February as unemployment rate falls

Canadian employment rose by 20,900 jobs in February, a slightly stronger gain than forecasts for a more moderate 15,500 rise going into today’s report.  The February rise builds on the 43,000 gain reported in January.  The unemployment rate edged down to 8.2% in February as employment gains outstripped an 8,600 rise in the labour force in the month.  

February’s gains reflected a 60,200 jump in full-time employment following January’s more moderate 1,400 gain.  Part-time employment declined by 39,300 in the month.  Gains were concentrated in the goods-producing industries that rose for the first time in three months with a 17,800 gain.  Employment in services industries rose for a second consecutive month but by a more subdued 3,100.  The rise in employment in goods producing industries was mainly concentrated in the manufacturing (16,900) and forestry, fishing and mining (10,600) sectors.  Gains in service-producing industries reflected fairly strong gains in the accommodation and food services (26,500) and the business, building and other support services (18,400) sectors with a notable offset coming from a 33,500 decline in wholesale and retail-trade services.  The gains in accommodation and food services may have been partly related to the 2010 Winter Olympics and Paralympic Games in British Columbia during the month.

For February, British Columbia, Nova Scotia and Saskatchewan led the employment gains.

The annual gain in the average hourly wage rate for permanent workers picked up to 2.5% in February, up from the 2.2% recorded in January but still well below the 3.9% annual rise a year earlier.

The increases in employment in both January and February bode well for the pace of expansion to remain firm in the first quarter of 2010 following the surprisingly strong 5.0% surge in growth in the fourth quarter of 2009.  Although the monthly employment numbers are volatile, the combined 63,900 jobs created so far in January and February suggests that the quarterly job gain in the first quarter of 2010 could exceed the total 20,700 gain recorded in the fourth quarter of 2009.  This pick-up in labour markets remains consistent with our expectation that GDP growth early in 2010 likely remained solid at a 3.8% annualized rate in the first quarter of 2010.  We expect the unemployment rate to remain elevated near term; however, we expect that sustained economic growth will eventually put downward pressure on the measure over the second half of 2010 and, as the recovery continues to pick up, the Bank will begin to look to withdraw monetary stimulus.  However we expect that moderate inflation growth will allow the
Bank of Canada to keep the pace of tightening moderate.  The overnight rate is expected to be held steady at 0.25% until the end of the second quarter. Rates will start to rise over the second half of this year yet by only 100 basis points, finishing 2010 at 1.25%.

Nathan Janzen, Economist, RBC Economics

Source: www.royalbank.com

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