UPDATE 3-Canada’s jobless rate unexpectedly drops in January

* Economy adds 43,000 jobs after December fall of 28,300

* Unemployment rate lowest since September

* Most new jobs are part-time as youth make major gains

* Canadian dollar gains modestly
(Adds comment, details, updates market reaction)

By Randall Palmer

OTTAWA, Feb 5 (BestGrowthStock) – Canada’s unemployment rate
unexpectedly fell in January to its lowest rate since September
and the economy added more jobs than expected, suggesting the
economy’s recovery was gaining momentum.

The unemployment rate dipped to 8.3 percent in January from
8.4 percent in December, and 43,000 jobs were added, Statistics
Canada said on Friday.

Economists surveyed by Reuters had predicted an
unemployment rate of 8.5 percent and a gain of 15,000 jobs.

Almost all of the new jobs were part-time, to some extent
reflecting the first notable increase in youth employment since
the fall of 2008. The youth jobless rate fell to 15.1 percent
from 16.0 percent.

Bank of Canada Governor Mark Carney said on Thursday he
would be looking carefully at the labor market in crafting
monetary policy. Canada’s unemployment rate has been more than
1-1/2 percentage points less than the U.S. figure.

The Canadian dollar rose as high as C$1.0716 or 93.32 U.S.
cents, from C$1.0749, or 93.03 U.S. cents just before the
report. This compared with Thursday’s close at C$1.0727, or
93.22 U.S. cents, and a three-month low of C$1.0781, hit in the
overnight session.

At 8:10 a.m. (1310 GMT), the Canadian dollar was at
C$1.0735 to the U.S. dollar, or 93.15 U.S. cents.

BMO Capital Markets deputy chief economist, Doug Porter,
said there was less than meets the eye in the report, but it
shouldn’t prompt action from the Bank of Canada yet.

“I don’t think there’s a big shock here for the Bank. The
fact the unemployment rate is grinding lower will be notable,
but I don’t think it’s enough to put the Bank on high alert by
any means,” he said.

The increase in employment follows a decline of 28,300 jobs
in December, a figure that was revised from a loss of 2,600 to
reflect new statistical methods. Employment was down only
16,000 from a year ago but remains 280,000 below the level of
October 2008, before the economic crisis began.

TRANSITION FROM EMERGENCY RATES?

The decline in the unemployment rate from its peak, if it
stays on pace, could point to transition from emergency level
interest rates, economists said.

“We are now down four-tenths from the unemployment peak. If
we keep going on this trajectory of improving a tenth or so per
month it does suggest that we are going to be down a full
percentage point from the peak by the time the Bank of Canada
gets to the end of its conditional commitment,” said Sheryl
King, head of Canadian economics and strategy at Bank of
America Merrill Lynch.

“This would signal to the Bank of Canada that the economy
is healing, and healing speedily, so emergency level rates at
25 basis points are probably inappropriate.”

It was a point echoed by Scotia Capital economist Derek
Holt, who said the headline figure was “encouraging, but the
details put a large dent in the initial enthusiasm.”

“That said, the trend is right, if albeit volatile. A
seesaw pattern of job gains and losses over recent months has
the net picture coughing up job growth, warts and all.”

“It is a further piece of evidence that the economy is
transitioning away from the need for emergency levels of
stimulus,” said Holt.

The Bank of Canada pledged last April to keep interest
rates at record lows until the end of June 2010, hinging on the
outlook on inflation.

Most of Canada’s primary securities dealers expect the Bank
of Canada will keep its conditional promise, though a third
expect the central bank to move sooner, according to a Reuters
poll last month before the latest interest rate decision.
[CA/POLL]

The largest employment rise in January, at 53,700, was
among private-sector employees. The month saw 13,400 more
public-sector employees, while self-employment dropped by
24,000.

Manufacturing has taken the brunt of the employment cuts
during the recession. The sector lost another 15,700 jobs in
January and employment stood 95,200 below the level of a year
earlier.

Stock Investing

(Additional reporting by Ka Yan Ng, Scott Anderson, Euan Rocha
and in Toronto; Editing by Padraic Cassidy)

UPDATE 3-Canada’s jobless rate unexpectedly drops in January