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Canada’s labour market wowed forecasters again with the economy producing another whopping 43,300 new jobs in February, well above the consensus forecast for a marginal 3,000 job gain. The unemployment rate held at the 33-year low of 5.8%. Wages for permanent employees rose 0.2% in February and were 4.7% higher than a year earlier.

The split between full-time and part-time employment was a replay of the January report with the gain concentrated in full-time jobs, which rose 49,500 in February, while part-time employment fell 6,200. Goods-producing industries cut 12,500 jobs, partially reversing January’s 44,100 gain. Construction employment rose by a healthy 20,800.

The service sector created 55,800 new positions. The largest job gains in the services sector were in transportation/warehousing (up 14,100), professional/scientific services (up 15,600), information and cultural industries (up 12,200) and public administration (up 15,800). Manufacturers shed 23,700 positions, more than offsetting the unexpected 17,500 increase in January.

The average hourly wage rate for permanent workers (the Bank of Canada’s favoured measure) rose 0.2% in January, while the year-over-year rate moderated slightly to 4.7% after holding at 4.9% in December and January, which was the fastest pace of increase on records back to 1997.

The strength in the labour market in the fourth quarter resulted in labour income rising at a 7.3% annualized pace, which supported the fastest rise in consumer spending in more than 22 years.

The pace of job gains picked up pace in January-February to 45,000 new positions per month from the 30,000 monthly pace in 2007 and will support labour income growth providing solid support for the consumer this year.

The main risk to the outlook for the consumer comes from the volatility in financial markets and rising credit spreads, which are boosting borrowing costs for Canadian households.

For the economy as a whole, the trade sector remains the biggest risk to the outlook as the weaker U.S. economy and high currency limit export growth, while the strong domestic economy keeps import demand growing. The heavy drag from trade on the pace of GDP growth and tightening in credit conditions will keep the Bank of Canada on an easing path. We look for two 25 basis point rate cuts to be delivered in the months ahead.

RBC Financial Group
http://www.rbc.com

The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.