Canadian employment increased by 12,500 in April 2013 and was just shy of market expectations for a 15,000 increase.
- The unemployment rate held steady at 7.2% with the labour force little changed.
- All gains were in goods-producing sector employment, which rose 24,500, while service-sector jobs were cut back by 12,000 in the month.
- After a weak first quarter of 2013 for hiring, April's gain started the process for the recovery of the 25,700 jobs lost in the quarter. Our monitoring of the economic data indicates a pick up in the pace of economic activity with real GDP on track to record a 2.3% annualized gain in the first quarter, which would be much quicker than the sub-1% growth rates recorded in the second half of 2012. This would also exceed the pace that the Bank of Canada projected in its April forecast. Additionally, the mild recovery in job growth in April sets the stage for the economy to continue to grow at close to its potential rate. Having said that, this pace of increase will not be sufficient to dent the excess capacity significantly in the economy; however, we expect that economic growth will accelerate further and be supported by low interest rates and a strengthening in the US economy. Given the benign inflation backdrop, the Bank is likely to maintain the overnight policy rate at 1.0% for the remainder of 2013 and into 2014 to support acceleration in growth and the gradual elimination of the output gap.