Canada's economy created far more jobs than expected in December and the jobless rate slid to a four-year low, bolstering the likelihood of a central bank interest rate rise later this year.
The economy added 39,800 jobs in December from November, Statistics Canada said on Friday, well above market expectations for 5,000 jobs and surpassing even the most bullish forecast in a Reuters poll of analysts.
In a report that appeared at odds with other figures pointing to sluggish growth, Statscan said the unemployment rate dipped to 7.1 percent from 7.2 percent in November. It was the third surprisingly strong jobs report over the past four months and contrasted with the situation in the United States, where non-farm payrolls rose a disappointing 155,000 last month.
Analysts expected little Canadian hiring in December, ahead of a recent deal by U.S. lawmakers and the White House to avert potentially crippling austerity measures due to take effect early this year "My initial response is not only are they defying expectations, they are defying gravity," Doug Porter, deputy chief economist at BMO Capital Markets, said of the Canadian jobs numbers
Canada has recovered all the jobs lost during the 2008-09 recession, although hiring has been unsteady as businesses fret about headwinds from the United States and Europe. Prime Minister Stephen Harper said those headwinds could mean more "bumps in the road" for the Canadian economy and people should not get too excited by a single month's data. However, he noted that employment has been growing steadily for several years. "We have more Canadians working today than ever before and we are one of the very few advanced industrial economies that can say that," Harper told reporters.
The Bank of Canada does not formally target employment, and inflation has been below its 2 percent target. But the strength of the jobs market suggests the economy entered 2013 in a stronger position than other economic indicators have suggested.
"I don't think the bank will be in any rush to do anything. But it likely means they'll keep a mild hawkish bias in place," said Porter. The Bank of Canada has held rates at 1 percent since September 2010, but has insisted for the past several months that the next move will be up, not down.