(Adds dropped word ‘OFFICIAL’ in headline)
* Economy adds 59,300 net new jobs vs forecast of 10,000 gain
* Jobless rate drops to 7.2 percent, lowest since June
* Analysts say report unequivocally strong
* Labor productivity declines 0.5 percent in 3rd quarter
* Bank of Canada not ready to raise rates yet
By Louise Egan
OTTAWA, Dec 7 (Reuters) - Canada’s economy churned out far more jobs than expected in November in a surprising comeback at a time of sluggish growth, offering hope of stronger fourth quarter economic showing.
However, Statistics Canada’s report on Friday was accompanied by a negative report on the labor productivity of Canadian businesses, which fell 0.5 percent in the third quarter, in contrast to a 0.6 percent rise in U.S. productivity.
Canada created a net 59,300 new jobs in November, mostly full-time positions and in the private sector, and the jobless rate fell to 7.2 percent, the lowest level since June, from 7.4 percent.
Market operators surveyed by Reuters had forecast, on average, 10,000 new jobs in November and a steady 7.4 percent jobless rate.
Finance Minister Jim Flaherty called the news “terrific” and economists were unanimously upbeat about the report, which came amid other signs the economy was struggling to gain momentum.
“Just as the conventional wisdom pretty much everywhere was that the Canadian economy was practically grinding to a halt, we get handed one of the strongest job numbers of the year,” said Doug Porter, deputy chief economist at BMO Capital Markets.
“It’s a solid report, from head to toe. At least upon first glance, I don’t see any major warts in the data.”
Nonfarm payrolls in the United States rose by 146,000 in the same month, proportionately not nearly as strong as Canada, but still better than expected, while the U.S. jobless rate fell to 7.7 percent from 7.9 percent.
Scotiabank chief currency strategist Camilla Sutton pointed to the strength in full-time and private-sector jobs.
“All in all, juxtaposed with the strong U.S. employment, it’s positive for the Canadian dollar,” she said.
The Canadian dollar jumped to a one-month high of C$0.9878 versus its U.S. counterpart, or $1.0124, compared with C$0.9925, or $1.0076, immediately before the releases. It was the Canadian dollar’s strongest level since Nov. 7.
Canadian bond prices fell across the curve, with the two-year bond down 5 Canadian cents to yield 1.070 percent, and the benchmark 10-year bond giving back 11 Canadian cents to yield 1.705 percent.
The average monthly employment gains were 20,700 over the past six months, a more realistic time frame given that monthly figures tend to be erratic.
Canada’s economy grew at a tepid 0.6 percent pace, annualized, in the third quarter. While the fourth quarter is likely to show some momentum, growth may not be strong enough to force the Bank of Canada to raise interest rates.
The central bank has held its key rate at 1 percent for over two years, but has been signaling plans to hike rates since April, the only central bank in the Group of Seven wealthy nations to have that hawkish tilt.
Economists say bank Governor Mark Carney is in a data-watching mode, particularly in light of the uncertainty surrounding the “fiscal cliff” in the United States.
Analysts were quick to point out that while the job market has shown resilience, the kind of blockbuster job creation seen in November is unlikely to be repeated.
“We look for something a little bit more muted in the 10 to 15,000 range, especially given the front-loaded nature of the job recovery,” said Mazen Issa, strategist at TD Securities.
“Right now I think the bank has mostly just focused on the external events. They’ll need to see what happens with the U.S. fiscal situation before they want to provide any updated views,” he said.
If there was a weak point in the employment report, it was that hiring was concentrated in the services sector, where lower-paid jobs are more common. Services created 65,700 positions led by accommodation and food services, retail and wholesale trade, and professional, scientific and technical services.
The goods-producing sector lost 6,200 jobs, with the number of workers in manufacturing declining by 19,600.
Year-over-year wage growth fell sharply to 2.2 percent in November from 3.9 percent in October, based on the average hourly wage of permanent employees.
The economy created only 1,800 jobs in October and a hefty 52,100 in September, although secondary data for that month showed a decline in nonfarm payrolls. (Reporting by Louise Egan; Editing by James Dalgleish)