Canadian employment rose by an estimated 65,000 in October, almost all in full-time jobs. This was the second consecutive increase in employment, says Statistics Canada, following slow growth earlier in the year.

Since the beginning of 2003, employment has grown by 1% (+164,000). The unemployment rate fell 0.4 percentage points in October to 7.6%.

A December cut to interest rates is now dead, economists say.

“It was another eye-popping, jaw-dropping, knee-knocking, blow-out month for Canadian employment in October, thus putting this year’s brief period of slow job growth to rest,” says BMO Nesbitt Burns. Nesbitt says that the details of the report are every bit as strong as the headline, with full-time jobs up by 62,100.

“The sharp drop in the jobless rate is particularly impressive, as it is very rare for the unemployment rate to fall this far, this fast,” Nesbitt says.

CIBC World Markets is a little less thrilled, saying, “As impressive as the September-October results are, we continue to express some caution regarding the outlook for employment. In addition to headwinds from the Canadian dollar, there may be little need to bring additional employees on board should the recent explosion in US economic activity turn out to be more of a growth spurt than a sustained, solid expansion.” It also notes a drop in hours worked, suggesting that underemployment may be a lurking issue.

Nesbitt says that if there is any complaint about today’s report, it is that the job gains were heavily concentrated in the public sector, with strong gains in health care and social assistance.

TD Bank also cautions that today’s report exaggerates the true underlying strength in the job market. “We would expect employment gains to ratchet down to the 10,000-20,000 range over the next few months.”

“Still, even factoring in this moderation ahead of the holiday season, today’s numbers are consistent with above-trend real GDP growth of 3.5% annualized in the fourth quarter — a figure roughly in line with the Bank of Canada’s 4% growth forecast,” it says.

“The crystal clear message in these jobs numbers is that Canada’s export sector should expect no help from the Bank of Canada when it comes to dealing with the stronger exchange rate. So far there is little evidence that Canadian economic momentum is being hobbled by the exchange rate,” notes RBC Financial.

RBC says that, given these numbers, the Bank of Canada will hold interest rates steady on December 2 and thereafter. “The Canadian bond market will also start pricing in rate hikes, but with the exchange rate still a source of uncertainty, the market will not be as aggressive as in the U.S. We continue to expect steady rates in Canada until late in 2004.”

“The fourth quarter is off to a roaring start, and this report appears strong almost from head to toe. This is the last jobs report the Bank of Canada will see prior to next month’s decision on rates and should further crush any lingering hopes of a near-term rate cut by the Bank,” Nesbitt concludes.