After a pause in January, employment resumed its upward trend with an increase of 55,000 in February. However, the unemployment rate was unchanged at 7.4% in February, the result of more labour force participation.

Friday’s report blew away the Street, with economists saying the it validates Tuesday’s decision by the Bank of Canada to increase interest rates.

“Flabbergasting, quite simply flabbergasting!” exclaims TD Bank. “In spite of all the roadblocks that have been erected in its path, Canada’s job-creation locomotive just keeps on plowing ahead. After taking what now appears as a mere breather in January, the Canadian economy pumped out another 55,200 jobs in February, leaving even the most optimistic of expectations in the dust. Moreover, any real pockets of weakness in today’s data were few and far between.”

TD notes that half of the jobs created were full-time, which puts the total gain in full-time employment in the first two months of the year to a hefty 61,800 positions. In addition, private sector — as opposed to public-sector or self-employed — positions accounted for slightly more than half of the total, while public-sector hiring added another 15,900 jobs. It notes that the only reason the unemployment rate remained stuck at 7.4% is because another 54,500 people entered the labour force, lifting the participation rate back to where it stood in December, at 67.5% — which matches the peak set in January 1990. “Put it all together, and Canada’s job market has pulled off another Herculean feat, which should go a long way towards silencing the harshest of the Bank of Canada’s critics following its decision this week to hike interest rates,” TD says.

CIBC World Markets says that the fact that runaway employment gains in the past year-plus have coincided with only modest progress in reducing the jobless rate, suggests that there was more available slack in the labour market than previously envisioned. “That theme continues to be reflected in the wage component of the employment report. Average hourly earnings for permanent workers are up just 2.1% year over year. Having averaged a benign 2% over the past three months, this indicator of wage pressure gives us reason to believe that core inflation still has room to come down.”

BMO Nesbitt Burns agrees that the report bails out the Bank of Canada. “For the small legion of doubters over this week’s rate hike by the Bank of Canada, officials can point to today’s employment report for February and ask: Any questions?” It calls the result “staggering”.

“The continued underlying strength in Canadian employment, incredible as it may be, suggests the Bank of Canada will continue to tighten and the loonie will continue to soar,” concludes Nesbitt.

“Enjoy it while it lasts, because job gains of this magnitude are unlikely to continue in the months ahead. The weakness on the export front that was revealed in last week’s GDP report is likely to have spilled over into the new year, and this will undoubtedly take a bite out of manufacturing employment in the months ahead,” says TD. “Even if job growth slows, however, it is unlikely to crumble. The domestic side of the economy will continue to fare well – a fact that was underscored yet again by yesterday’s release on building permits. Public spending will also continue to add to hiring, especially in the health-care sector. All told, while job creation will be only modest until the summer, the tally for the year as a whole should come in at a strong 280,000 positions.”

http://www.statcan.ca/Daily/English/030307/d030307a.htm