OTTAWA — Canada’s private sector is showing signs of kicking into gear, having added 42,400 jobs in March even as governments and the broader public sector moved to shed workers.
The hiring from the non-governmental sector was a bright spot in an otherwise lacklustre Statistics Canada report that said a modest net 17,900 jobs were added across the country — all part-time — after subtracting 20,600 who had jobs in the public sector and 4,000 people who had been self-employed.
It was the second time in three months that the private sector has outperformed the public in hiring as governments looked for ways to cut costs and deficits accumulated while they tried to stimulate the economy through the 2008-9 downturn.
“We are seeing gains in the private sector,” Human Resources Minister Diane Finley said in an interview.
Asked if it was strong enough to offset what is expected to be an actual reduction in government workers in the next few years, she added:
“It’s going to be an evolution, no question. But as we look at people who are available in our labour market over the longer term, everyone is going to have become more efficient, including the public sector and the private sector.”
Bank of Canada governor Mark Carney has long pointed to the “hand-off” of the economy from public stimulus to increased output in the private sector as the key to whether the economic recovery is sustainable.
March’s number brings the number of jobs created since July to 176,000, with most of them coming in the public sector.
“At some point the Canadian economy is going to have to transition to the public sector carrying more of the load, and maybe we’re starting to see it,” said Royal Bank assistant chief economist Paul Ferley, adding it is still not clear whether the trend will be sustained.
The numbers reported by Statistics Canada were below the 26,000-job gain that economists had been expecting.
The shortfall quickly sent the Canadian dollar down to 99.17 cents US shortly after the 7 a.m. EST release time, down nearly a cent from just before the report. The loonie bobbed up a bit, later in the day, but remained below US$1
Analysts said currency markets appeared to have over-reacted, dumping the loonie not on facts but on rumours that began spreading Thursday afternoon.
“There were rumours of a leak and that the (jobs) print would be 35,000 ... swept through foreign exchange desks,” said Scotia Capital economist Derek Holt. “That’s why we saw the Canadian dollar strengthen quite significantly yesterday.”
The loonie did recover from the early morning disappointment and was trading near 99.5 cents US in at mid-afternoon.
Even though last month’s tally was less than expected, Canadians should not underestimate the importance of what has occurred in Canada’s job market since July, added Holt. He said March was likely weaker because of a one-time loss of “temporary full-time jobs” associated with the now ended Olympic Winter Games
“That’s a job market recovery on par with only Australia,” he said. “Most other economies can only dream of job gains like this.”
Scotiabank sent out a note Friday morning saying it now expects the Bank of Canada will raise its key rates by one-quarter of a point on June 1, rather than at the following rate announcement.
The Bank of Montreal also saw the glass as half full, noting that the first quarter pick-up in jobs — 82,000 — was the strongest in two years, although it said rates were still unlikely to move until the central bank’s July 20 announcement.
There has been widespread debate about just exactly when Canada’s central bank will begin to push up its key interest rate in an effort to remove economic stimulus and prevent inflation from getting out of hand.
The Bank of Canada has said it would likely keep the policy rate at an all-time low of 0.25 per cent until the end of the second quarter unless unacceptably high inflation emerged — a potential symptom of unsustainable economic growth.
In recent weeks, almost all of Canada’s major indicators have been positive.
Earlier this week, the Paris-based Organization for Economic Co-operation and Development, predicted Canada will lead other G7 countries in the recovery with a massive 6.2 per cent growth rate in the first quarter of 2010.
March’s employment data contained other positive elements, including that there were strong gains in the critical goods-producing industries and that all the net job gains were employees, rather than in the self-employment category.
Construction adding 21,000, and manufacturing and extraction also showed modest gains.
Still, the manufacturing sector remains down 286,000 workers since October 2008, when the recession hit Canada’s shores.
In March, most of the losses came in the services sector. Regionally, Ontario and Quebec were responsible for almost all the national increase in employment, adding 10,300 and 6,300 jobs respectively.