Canada posts surprise jobs gain in May and June could be even better

OTTAWA (Reuters) - Canada unexpectedly added almost 290,000 jobs in May as some provinces loosened COVID-19 restrictions on businesses, data showed on Friday, and there could be an even bigger improvement in June.

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Canada lost some 3 million jobs from February to April, but recovered 289,600 of them in May, Statistics Canada said. The jobless rate hit a record high of 13.7%.

Analysts in a Reuters poll had predicted a loss of 500,000 jobs and an unemployment rate of 15.0%.

“The lifting of restrictions are starting to be very good for the job market in May, and you can expect that it will continue in June,” said Benoit Durocher, a senior economist at Desjardins in Montreal, who was the only economist among 19 in a Reuters poll who had projected an jobs increase on Friday.

Benoit forecasts that employment will climb 800,000 in June as Ontario, the most populous province, starts to contribute to the upswing. Quebec, the Canadian province with the most COVID-19 cases, drove May’s gain after lifting some restrictions from mid-April.

“I think this probably counts as the largest job gain in Canadian history for one month, but it’s also still just a drop in the bucket in terms of recovering the lost jobs over March and April,” said Nathan Janzen, senior economist at RBC.

The Canadian dollar CAD= climbed to a three-month high at 1.3395 per U.S. dollar or 74.65 U.S. cents. The United States, Canada's largest trading partner, also posted surprise gains for May.

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Prime Minister Justin Trudeau said on Friday the government has approved more than 300,000 applications for its wage subsidy program, which he said was keeping “millions” employed, and that roughly 1.2 million Canadians who had been receiving federal income support each month no longer need it.

“This is encouraging news, but we’re nowhere near done,” he said.

The May data did not capture the 1.4 million people who temporarily lost their jobs due to COVID-19 closures, but are not currently looking for employment, Statscan said. Had those numbers been counted, the May unemployment rate would have been 19.6% rather than 13.7%.

The record jobless rate was driven in part by students entering the summer job market who must be actively seeking work to get government COVID-19 benefits. The unemployment rate for returning students surged to 40.3 percent compared with 13.8 percent in May 2019, Statscan said.

Employment in the goods producing sector gained 164,700 jobs, while the services sector gained 124,900 positions.

Additional reporting by Steve Scherer and Dale Smith in Ottawa, Fergal Smith, Jeff Lewis and Moira Warburton in Toronto; Editing by Nick Zieminski and Jonathan Oatis