* Employment rises by 28,400 vs forecast of 15,000
* Unemployment rate unchanged at 7.4 percent
* Gains in part-time, public sector jobs
* C$ briefly rallies but sinks after U.S. data
* Rate hike expectations dampened by wages, U.S.
(Recasts with U.S. data. Adds market reaction, analyst
By Louise Egan
OTTAWA, July 8 Canada's economy created a
surprisingly high number of jobs in June, but dismal U.S. data
and lack of wage inflation may mean the central bank keeps its
foot on the accelerator for a while longer with low rates.
Net employment gains in the month totaled 28,400,
Statistics Canada said on Friday, compared with the 15,000
expected by markets. The transport and warehousing industry did
the most hiring and overall gains were mostly in part-time and
public sector jobs.
The unemployment rate held steady at 7.4 percent as more
people entered the labor market.
The job market has been stronger than expected for three
straight months now, good news for an economy that is seen to
have slumped in the second quarter but may regain momentum in
the second half of the year.
"It was a pretty decent number. ... It's basically
suggesting the economy continues to expand at a fairly decent
rate," said Sheryl King, chief economist at Bank of America
Merrill Lynch Canada.
But weakness south of the border, where U.S. employers
hired the fewest number of workers in nine months, quickly
dampened spirits in Canadian markets. [ID:nLLA8IE7HL]
The U.S. economy actually created fewer jobs than its
Canadian counterpart in June despite being many times its
The Canadian dollar, which had firmed to a session high
against the U.S. dollar after the Statscan release, tumbled on
the U.S. numbers to a session low of C$0.9665 to the U.S.
dollar, or $1.0347.
Graphic: Canada jobs, unemployment
The uncertain external environment, combined with the
absence of wage pressures, could be more meaningful to the Bank
of Canada than employment gains when it plots the path for
interest rates, analysts said.
The central bank could opt to postpone rate hikes in the
belief the economy can continue to expand without prices
getting out of hand.
Wages for permanent employees rose 2 percent in the year to
June, down from 2.2 percent in May.
"What matters the most to the Bank of Canada is not the
headline jobs print, but any evidence of wage motivated
cost-push inflation pressures. Simply put, there aren't any,"
Scotia Capital economists Derek Holt and Karen Cordes Woods
said in a note to clients.
"The fact that both wage growth and hours worked are
moderating offers a very different take on what is influencing
household spending than any upbeat perspectives on the headline
job prints," they wrote.
The Bank of Canada has held its key policy rate steady at 1
percent since last September following three successive hikes
to lift it from emergency lows.
In a June 29 Reuters poll, Canada's 12 primary securities
dealers unanimously forecast no rate move on July 19. Six
predicted a first hike in September and the rest saw no moves
until some time in the fourth quarter or even next year.
Yields on overnight index swaps, which trade based on
expectations for the central bank policy rate, continued to
reflect almost zero chance of a rate move on July 19.
Rate hike expectations for September, October and December
briefly rose after the Canadian data but fell again after the
U.S. release. BOCWATCH
The strongest hiring in June took place in the
transportation and warehousing industry, which has led
employment gains in the past year.
Employment was flat or little changed in manufacturing as
well as in most other sectors with the exception of
professional, scientific and technical services, which lost
Some other details of the report were less upbeat. Private
business continued to lag behind the government in terms of
hiring, despite the phasing out of government stimulus
Far more part-time jobs were created than full-time ones,
although the 12-month trend has favored full-time positions.
Statscan said the majority of the jobs went to women in the
25-54 age group.
(Additional reporting by Howaida Sorour, John Tilak, Euan
Rocha and Solarina Ho; Editing by Jeffrey Hodgson)