Job surge may signal economy turning corner

Ontario leads charge as market adds six times more positions than forecast last month

Ontario led an eye-popping surge in the number of new jobs created in Canada in May as a lower dollar boosts hiring on the factory floor, Statistics Canada data show.

The Canadian labour market pumped out 58,900 net new jobs in May, nearly six times as many as economists had predicted, the federal agency said Friday.

While the national unemployment rate remained unchanged for the fourth month at 6.8 per cent, it was due to more Canadians entering the labour force.

“This is certainly a big step in the right direction,” said Doug Porter, chief economist at BMO Capital Markets, adding it suggests the economy is recovering from a very challenging start to the year.

While the monthly data can be highly volatile, the economy has created an average of 20,500 jobs per month since the start of 2015, a better rate than in each of the two previous years.

The impact of the dramatic plunge in global oil prices since June 2014 may not be as severe as expected, economists said.

“There is far more resiliency in the Canadian job market than anybody had thought,” said Derek Holt, Scotiabank’s vice-president of economics.

Others cautioned that it’s too early to say the economy is back on track after shrinking 0.6 per cent in the first three months of the year as a steep drop in global oil prices hit Alberta’s energy sector hard.

The report was “very strong, but some of it is likely a reversal of the weakness from April,” Charles St-Arnaud, senior economist at Nomura International, said by email from London. “There are still a lot of headwinds for the economy.”

Ontario led the labour market in May, creating 43,900 new jobs, Statistics Canada said. The provincial jobless rate fell by 0.3 percentage points to 6.5 per cent, dipping below the national average for the first time in nine years.

“It’s a good news month for Ontario,” Ontario Economic Development Minister Brad Duguid told reporters at Queen’s Park. He empha- sized the numbers do tend to fluctuate from month to month.

Most of the strength was in manufacturing, finance and real estate as a lower dollar helps boost exports and low interest rates maintain demand for housing and cars.

Bank of Canada Governor Stephen Poloz surprised markets in January with a quarter point cut in the bank’s trendsetting interest rate, to 0.75 per cent, calling it insurance against the impact of falling oil.

Oil fell from a high of more than $100 (U.S.) a barrel in June 2014 to less than $50 in January

Poloz has said the worst of the impact would be felt in the first quarter.

The loonie rose 0.3 per cent to 80.20 cents on the jobs report though it remains down 6.8 per cent so far this year.

“Suddenly, it seems the Canadian economy in the second quarter maybe is bouncing back,” said Jane Foley, a senior currency strategist at Rabo- bank International in London.

There were further signs Friday that the U.S. economy continues to gain strength. It created a solid 280,000 net new jobs last month, which bodes well for future demand for Canada’s exports.

U.S. unemployment crept a point higher to 5.5 per cent as more people looked for work.

Alberta, meanwhile, continued to feel the impact of cuts in the energy sector. The provincial economy shed another 6,400 jobs in May driving its unemployment rate up by 0.3 percentage points to 5.8 per cent.

Canada’s “significant job creation in May blew way past everyone’s expectations and is most probably the big shot in the arm that the economy needed,” Arlene Kish, senior principal economist with IHS Global Insight wrote in a report to clients.

While the headline number was good, the details were also strong, she noted.

The private sector added 56,800 new jobs, while public sector employment fell by 19,100, Statistics Canada said.

Full-time employment rose by 30,900, while part-time employment grew by 27,900.

Manufacturing led the gains, creating 21,500 new jobs in May, the best monthly advance since 2002.

The health-care sector created 20,700 new jobs, while jobs in retail and wholesale trade rose by 16,800, reversing all of April’s losses, which were attributed mainly to the massive closing of Target Canada’s stores.

Finance and real estate also rose by 12,700 jobs, reflecting a hot spring housing market.

In other positive signs, average hourly wages of permanent employees rose 2.9 per cent in May from a year earlier, faster than April’s 2.4 per cent gain. The number of hours worked climbed 1.2 per cent. With files from Star wire services