Jobs up, loonie down on U.S. rate hike speculation

Most newly created positions located in Ontario and B.C.

The loonie fell sharply on Friday despite robust job creation data as U.S. labour market gains raised expectations the Fed will hike its benchmark interest rate next month, the first increase in nearly a decade.

U.S. employment rose by a betterthan-forecast 271,000 positions in October to send the jobless rate to a seven-year low, according to government data released Friday.

Canada also topped the consensus view of economists, with 44,000 new jobs in October versus expectations for 10,000 additions. Ontario accounted for two-thirds of positions created.

But observers say flat GDP growth, largely the result of low oil prices on the resource sector, means a rate hike in Canada is unlikely in the near to medium term. Canada’s unemployment rate ticked down a notch to 7 per cent in October, Statistics Canada said, also on Friday, adding that most of the gains came from temporary workers hired to prepare for the Oct. 19 federal election.

In the U.S., the Federal Reserve has signalled that barring an unexpected economic shock such as a global stock meltdown, it would raise rates from 0.25 per cent at its December meeting. Federal Reserve chair Janet Yellen repeated the forecast this week.

The U.S. job creation data suggests the world’s biggest economy is bouncing back after sluggish growth in August and September, with the labour market posting gains across a range of industries despite weakness in manufacturing.

Payroll data for August and September were revised upward to show 12,000 more jobs created than previously reported while hiring pushed up wages by nine cents to $25.20.

The U.S. unemployment rate fell by a basis point to 5 per cent, a level consistent with full employment that could trigger a 25 basis point target rate hike by the Federal Open Market Committee at its mid-December setting.

In Canada, the labour market “con- tinues to hold up better than expected,” TD economist Leslie Preston said in an email, citing strength in private sector job growth along with election-related hiring.

But Preston said the jobs report south of the border will have a farreaching effect.

“This will act to tighten financial conditions in Canada. Add to that the significant excess capacity in Canada’s economy with only modest growth ahead, and despite the resiliency of Canada’s job market to date, the Bank of Canada is likely to leave interest rates at their current stimulative setting for quite some time.”

Canadian jobs grew for the fourth consecutive month with the public administration category ahead by 32,000, although job creation topped expectations even without election hiring.

Retail and wholesale companies added 17,600 positions in October and food service and accommodation employment rose by 12,900.

Part-time employment in Canada rose by 35,400 in October and fulltime work grew by 9,000. Public-sector employment rose by 30,500 and private companies hired another 41,300 people.

Workers designated by Statistics Canada as employees rose by 71,700 while the self-employed category declined by 27,300.

The natural resources sector fell by 8,000 jobs amid cuts by energy and commodity producers trying to cope with a prolonged slump in prices for crude oil and other resources.

Six of the 10 provinces posted job gains, but the strength was heavily concentrated in B.C. and Ontario, with respective increases of 23,000 and 29,000 added positions.

Alberta lost 10,800 jobs mostly in resource industries while Quebec slipped by 5,600.

The Alberta jobless rate rose to 6.6 per cent compared with Ontario’s 6.8 per cent.

Canada’s dollar, however, tumbled as currency markets factored in a 75-per-cent likelihood that the U.S. will hike rates in December. That would in turn attract more investment capital to the greenback at the expense of other currencies.

The loonie ended the day at 75.21 cents (U.S.), down 0.73 of a cent from Thursday’s close.