WRAPUP 1-Canada jobs gain boosts talk of rate hike pressure

* Economy adds 24,700 jobs in May vs 12,500 forecast

* Rate hike in July now more likely – analysts

* Building permits show unexpected gain in April

By David Ljunggren

OTTAWA, June 4 (BestGrowthStock) – Canada added almost double the
number of jobs expected in May, prompting analysts to predict
the Bank of Canada will come under more pressure to raise
interest rates again next month despite rocky global markets.

Statistics Canada said on Friday employment rose by 24,700
positions in May compared with the expected gain of 12,500. A
record 108,700 new jobs were created in April.

“This should up the ante on further Bank of Canada hikes.
This is simply an astounding jobs report,” said Derek Holt of
Scotia Capital.

Canada became the first member of the Group of Seven
industrialized nations to raise rates when the Bank of Canada
lifted its key rate by 25 basis points this week to 0.50

The central bank, whose next rate announcement will be on
July 20, said it would weigh domestic and global developments
carefully before acting again.

“The (Bank) was saying they are going to pay a lot of
attention to incoming data and this would further suggest we
could likely see another 25 basis point hike in July,” said
Matthew Strauss, currency strategist at RBC Capital Markets.

The unemployment rate remained at 8.1 percent in May,
matching market forecasts.

Shortly after the jobs data, yields on overnight index
swaps — which trade based on expectations for the Bank of
Canada’s key policy rate — mostly edged higher, showing the
market saw tightening as slightly more likely.

But within an hour of the report, overnight index swaps had
moved lower, suggesting tightening was less likely. (BOCWATCH: )

Canada’s job numbers were strong compared to those in the
United States, where May nonfarm payrolls increased by a
less-than-expected 431,000 and the jobless rate fell to 9.7
percent from 9,9 percent. [ID:nN03243431]


Statscan also reported the value of Canadian building
permits in April had risen by 5.4 percent compared with
analysts’ predictions of a 2.0 percent drop.

While a string of healthy data show the Canadian economy is
out of recession, the outlook for Europe is gloomier.

“While external global risks abound, the employment data
underscore the need to continue to gradually reduce the
monetary policy stimulus provided by the Bank of Canada,” said
Pascal Gauthier, senior economist at TD Economics.

“In the near-term, this provides incremental support for
continued Bank of Canada overnight rate renormalization (+1/4
point to 0.75 percent) on July 20.”

The jobs numbers did little to help the Canadian dollar,
which sank on new concerns about Europe and global growth.

The Canadian dollar (CAD=D4: ) firmed to a session high of
C$1.0352 to the U.S. dollar, or 96.60 U.S. cents, from C$1.0379
just before the data but then weakened and hit a session low of

Statscan said full-time employment rose by 67,300 jobs in
May, offsetting a loss of 42,500 part-time jobs. The private
sector added 43,400 positions while the public sector had a
more modest gain of 9,400.

Since the Canadian labor market began recovering last July,
310,000 workers have been added to payrolls — still short of
the 417,000 jobs lost between October 2008 and July 2009.

“The exceptionally strong employment growth over the past
few months highlights the positive momentum in the Canadian
economy and reinforces the Bank of Canada’s rationale to hike
rates earlier this week despite the turmoil in Europe,” said
Benjamin Reitzes BMO Capital Markets Economics.

The average hourly wage of permanent employees, watched by
the Bank of Canada for inflation pressures, rose 2.7 percent in
May from a year earlier, up from the 2.3 percent year-on-year
rise in April.

Investment Analysis

(Additional reporting by Jennifer Kwan, Euan Rocha and John
McCrank; Editing by John O’Callaghan)

WRAPUP 1-Canada jobs gain boosts talk of rate hike pressure