CANADA: Employment jumped 15K in February according to the Labour Force Survey. As a result, the jobless rate dropped two ticks at 6.6% with the participation rate dropping to 65.8% from 65.9%. The surge in February employment was mostly due to paid jobs (+10K) which were tilted towards the private sector (+17K). Government jobs posted a 7K decline. Goods sector payrolls declined by 15K while services sector employment jumped 30K. Full-time employment soared 105K, while part-time employment dropped 90K. Total hours worked were down 0.3% in February on a year-on-year basis, an improvement compared to the -0.8% registered in the prior month. This should alleviate the Bank of Canada’s concerns about this indicator. From August to January, the Canadian labor market created a whopping 239K jobs, the strongest performance in 15 years over a 6-month period. For the coming months, we continue to think that a statistical correction is in the cards after those outsized gains. The economy is speeding up in 2017 but this does not mean that employment gains will be stellar as we see productivity explaining a larger part of economic growth.
The merchandise trade surplus widened to C$0.8 billion in January from a downwardly revised C$0.5 billion the prior month. The improvement was due primarily to a 0.5% rise in nominal exports driven by a 7.7% surge in motor vehicle shipments, but also to a 0.3% drop in imports. January’s surplus, the third in a row, was explained in part by better terms of trade (i.e., ratio of export prices to import prices). These reached their highest level since early 2015. In real terms, exports increased 0.8%, while imports rose 1.1%. This means that trade has been a drag on growth early in Q1. Though we continue to expect exports to pick up in 2017, supported by a weak currency and stronger growth south of the border, the acceleration will be curtailed by the destruction of manufacturing capacity observed in the past five years in Ontario and Quebec.
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