Another vote for global recovery: Canada posts surprise job gain
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Hopes for a sustained global economic recovery got another lift today when Canada reported an unexpected jump in employment.
That could put Canada in line to follow Australia in raising short-term interest rates. In a surprise, the Australian central bank on Tuesday boosted its benchmark rate to 3.25% from 3%, after declaring that ‘the risk of a serious economic contraction’ Down Under had passed.
The Canadian bond market seems more than a little worried about the prospect of higher interest rates: The annualized yield on two-year Canadian government notes rocketed to 1.71% today from 1.33% on Thursday.
The Canadian dollar rose to 95.9 U.S. cents from 94.4 cents on Thursday, the highest in more than a year, even though the beaten-down U.S. currency was rebounding against most other currencies. The Toronto stock market was off modestly after four days of gains.
From Bloomberg News:
Canada’s jobless rate unexpectedly fell last month, signaling that the U.S.’s largest trading partner has begun an economic recovery that may lead the central bank to increase interest rates within the next year. Employment rose by 30,600, six times more than forecast, on new jobs in construction and government, Statistics Canada said today. The jobless rate fell to 8.4% from 8.7% in August. The central bank lowered its benchmark lending rate to 0.25% in April and pledged to keep it there through June 2010 unless the inflation outlook changes materially. ‘The risks of them going sooner rather than later are increasing at the moment,’ said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto, adding he still expects the bank will wait until the middle of next year to raise borrowing costs.
Canada, which like Australia is a major commodities exporter, should benefit from rising raw materials prices if the global recovery picks up steam.
But the government downplayed the gain in jobs in September, saying employment was boosted by federal stimulus programs. And because the U.S. buys most of what Canada exports, the Canadian economy’s outlook still depends in large part on the U.S. outlook.
‘My big concern remains the U.S.,’ Prime Minister Stephen Harper told reporters today. ‘Even though we’ve had some good jobs news today, we aren’t out of the woods yet.’
-- Tom Petruno