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April's blockbuster jobs numbers -- which were five times higher than expectations -- are raising expectations the Bank of Canada will raise interest rates.
The Canadian economy added 58,200 new jobs -- nearly all full-time -- in April, Statistics Canada said on Friday. That comes on the heels of 82,300 jobs added in March, bringing the two-month total to 140,500 -- marking the biggest back-to-back jobs gain in 30 years.
"This certainly puts a very positive spotlight on Canada -- you can't just dismiss this sort of number," Avery Shenfeld, chief economist at CIBC World Markets, tells BNN.
However, the jobless rate ticked higher to 7.3 percent from 7.2 percent, as more workers entered the labour force in search of employment.
Details of the job picture also showed strength. All the new posts were in the private sector and 43,900 of them were full-time. The number of employees rose by 66,600, while those in the often-softer category of self-employed fell.
The Canadian economy has recovered all the jobs, including full-time positions, that it lost in the 2008-09 recession.
Construction jobs rose by 24,600 in April as Canada's housing boom continued. Employment in manufacturing rose 23,800 and was almost unchanged from a year earlier despite the challenges the sector faces due to the strong Canadian dollar. Jobs in natural resources industries rose by 11,000, with employment now 12.5 percent higher in a year.
Overall, employment has risen 214,000 in the past year. Over the last six months, it has gone up by an average 23,000 a month.
The Bank of Canada, which sees the economy's spare capacity diminishing, has said it may have to increase rates modestly. The bank, however, is also eyeing the unsettled European debt crisis for a potential backlash on North American economies.
"The Bank of Canada pretty much spelled it out, if we average about 2.5-percent quarterly growth rates, the will raise interest rates," Shenfeld says. "First quarter came in below that…if we make up for that in the second and third quarter then rate hikes would be back on the table - even with the mess in Europe."
Its next rate decision is on June 5, but few economists expect it to move on rates that soon.
The bank targets consumer price inflation of 2 percent, and one figure it watches carefully is wage inflation. The April data showed the average hourly wage of permanent employees up 2.4 percent from a year earlier. This was down slightly from March's 2.5 percent but up from 2.1 percent in February.
With files from Reuters