OTTAWA – Canada’s economy showed signs it may be ready to bust out of its half-year funk by churning out a surprisingly strong 50,700 new jobs in February, most of them full-time, in the private sector and in Ontario.
The outsized gain was enough to keep the unemployment rate at the four year low of 7.0 per cent despite the fact over 60,000 Canadians joined the labour force in the month, another good signal for the economy.
Regionally, Ontario was the biggest generator of new jobs, adding 35,300, followed by British Columbia with an increase of 19,800. Quebec had the biggest drop in employment, shedding 13,100 jobs.
Finance Minister Jim Flaherty cited the “good economic news” Friday after his meeting with private sector economists, who gave him some bad news as well — the economy won’t grow as fast as was expected this year.
Still, the minister noted that the latest bump in job creation meant that Canada had churned out almost one million new jobs since the end of the recession in July 2009.
“And just this morning, General Motors of Canada Ltd. announced an investment of $250 million to upgrade their plant in Ingersoll, Ont. That is a welcome investment,” he said.
Economists had expected a second weak month in February given that most indicators have been pointing to modest growth and January saw an outright loss of nearly 22,000 jobs. The forecast had been for about 8,000 new jobs.
But instead the labour market reversed all the negative signals sent out in January, and then some. Not only did job gains swamp the previous month’s losses, but Canadians who had exited the labour force returned with a vengeance.
“Up until today, economic indicators had suggested that the Canadian economy was sputtering as opposed to accelerating,” said Sonya Gulati, a senior economist with TD Bank.
“Today’s employment numbers put some of these concerns to bed. While headwinds are plentiful and downside risks numerous these should abate, enabling economic growth in Canada to pick up in the second half of this year.”
Canada’s economic prospects were also buoyed by what happened south of the border, where U.S. employers also ramped up hiring with 236,000 new jobs, pushing the unemployment rate down to 7.7 per cent. That’s the lowest in four years.
With many of Canada’s domestic growth engines — housing, government spending and consumer purchases — operating in low gear, analysts say the country’s economic prospects over the next few years rest almost solely on a strong pick-up in U.S. and global demand to bolster the export sector.
The Canadian dollar surged shortly after the two announcements, rising 0.53 of a cent to 97.67 cents US. However the loonie had retreated somewhat from that mark by mid-afternoon, trading at 97.25 cents US.
The details of the Statistics Canada’s employment report were almost as strong as the headline number. Most of the new workers were employees, rather than in the weaker self-employment category, in the private sector and full-time jobs beat out part-time positions two-to-one.
The only weak link came in the manufacturing, which continued its losing streak of the past few months. The factory sector dropped 25,600 workers in February, putting it in negative territory overall for the past 12 moths.
Bank of Montreal economist Robert Kavcic noted that the labour market has been blissfully unaware of how weak the economy is supposed to be for six or seven months. The country has been adding about 30,000 jobs a month, while the second half of 2012 saw output fall to a snail’s pace of 0.7 per cent annualized.
“It’s a bit of a head-scratcher,” he said. “It doesn’t really jibe with sub-one-per-cent growth.”
Statistics Canada said the country has managed to add 336,000 new jobs over the past 12 months, almost all full-time. As well, total hours worked increased by 1.9 per cent.
What’s more, Kavcic said it wouldn’t surprise him if employment continued to register gains in the upcoming months as the economy rides the back of a gathering U.S. resurgence, particularly in housing, factory activity and consumer spending.
Economists warn against placing too much stock in one data point, but the jobs surprise was not a one-off occurrence. On Thursday, Statistics Canada reported that exports rebounded by 2.1 per cent in January, and also Friday morning, Canada Mortgage and Housing Corp. said home starts had jumped to 180,719 units annualized in February, reversing the previous month’s slumping 158,998 number.
While the good news cames too late to change the advice economists gave Flaherty, they do offer some hope, said Doug Porter, chief economist with BMO Capital Markets.
“After a couple of months of pretty soggy data, there is at long last some hope that things have bottomed out and started to improve,” he said.
“The job numbers on both sides of the border are good news indeed and the housing numbers give us some comfort … we probably are headed for a soft landing on the housing side.”
Earlier in the week, the Bank of Canada stuck to its forecast of 2.0 per cent growth for this year, although the consensus of private sector economists that Flaherty will use for budgetary planning is likely closer to 1.7.
CIBC’s Avery Shenfeld says much depends on what happens in the global economy and the U.S. If they gather steam as expected, Canada will follow along on their coattails.
The February employment data showed all of the growth was in the services side, led by a 26,000 gain in the scientific and technical services sector. There were also 21,000 additional workers in the accommodation and food services, which may have been partly due to resumption of NHL hockey in late January. Public administration and agriculture also saw gains.