* May job gains 2nd biggest since data series began in 1976
* Monthly data volatile, six-month trend shows modest gains
* Scandal-plagued government touts jobs record, warns of
* Labor productivity grows 0.2 pct in first quarter
By Louise Egan
OTTAWA, June 7 Canada's economy churned out a
spectacular 95,000 jobs in May, the second-biggest gain in 37
years, according to an official report that raised hopes the
economy is gaining momentum, but was also taken with a grain of
The gain would be the equivalent of the far larger U.S.
economy creating nearly 900,000 jobs in a single month, well
above the still-decent 175,000 workers hired there last month.
Canada's unemployment rate ticked down to 7.1 percent from
7.2 percent, Statistics Canada said in its report on Friday.
The data handily beat market expectations for 15,000 new
jobs, but it changes little for the Bank of Canada, which is
expected to keep interest rates on hold at their current low
levels until late 2014.
"This erases some of the fears in the market that Canada was
wildly underperforming the U.S. and the domestic economy was
very weak," said Camilla Sutton, chief currency strategist at
Scotia Bank in Toronto.
Canada long ago recovered all the jobs lost during the
2008-09 recession, but unemployment remains above pre-crisis
levels and net job losses were recorded in the first four months
of this year.
After the data, the Canadian dollar jumped to its
strongest level against the U.S. dollar since mid-May, rising to
C$1.0186, or 98.17 U.S. cents. It gave back some of those gains
to trade at C$1.0215 at around 11 a.m. EDT (1500 GMT) compared
with C$1.0250 just before the jobs report.
The May data brings average monthly employment growth - a
reading considered more accurate because it smooths out the
volatile monthly numbers - to 19,000 over the past six months.
But analysts warned against divining too much from the May
figures. Canada's jobs figures are volatile, partly because they
are based on interviews with households whereas the U.S.
payrolls data is based in information from hiring companies.
Previous blockbuster Canadian jobs reports have been viewed
with skepticism and later seen as anomalies. Still, experts said
the May increase is significant even when taking into account
the large margin of error in the survey.
The construction sector accounted for nearly half of the May
hiring, in an indication of the stubborn strength of Canada's
heated housing sector, and analysts doubted that would last.
Some 76,700 full-time positions were added in the month and
94,600 new jobs were in the private sector, Statscan said.
The report is good news for the Conservative government,
which is reeling from an expenses scandal but has tried to brand
itself as a strong steward of the national economy and public
In a statement, Finance Minister Jim Flaherty touted
Canada's job record as the strongest in the Group of Seven
industrialized nations. But he warned that all was not well in
the global economy.
"Canada is not immune to these challenges from beyond our
border and we will be impacted," he said.
GROWTH, PRODUCTIVITY EYED
After a sluggish second half of 2012, rising exports helped
pull first-quarter growth to an annualized rate of 2.5 percent,
the fastest in six quarters.
The Bank of Canada expects 1.8 percent growth in the second
quarter and 1.5 percent growth in 2013 as a whole.
Statscan also said the labor productivity of Canadian
businesses increased 0.2 percent in the first quarter, in line
It was the second straight quarter of tepid growth after
three quarters of declines.
Canada has generally lagged the United States on
productivity measures and that was the case in the first quarter
as well as U.S. labor productivity grew 0.5 percent.
Canadian business output expanded 0.7 percent in the first
quarter while hours worked rose at a slower 0.5 percent pace.
Labor unit costs in Canada declined 1.8 percent when
measured in U.S. dollars compared with a 1.3 percent decline for