Employment and the Canadian Dollar

Statistics Canada reported this month that employment in Canada rose by 50,700 in February, reversing course after a decline in January of 21,900. New jobs were spread between full- and part-time work.

Canada's unemployment rate remained at 7 percent, as more people participated in the labor force.

Canada has added 336,000 jobs over the past year, employment growing by 1.9 percent, predominantly in full-time work. Over the same period the total number of hours worked also increased by 1.9 percent.

Ontario (35,000), British Columbia (20,000), Nova Scotia (3,000) and New Brunswick (2,900) posted job gains, while employment in Manitoba decreased by 3,200. Quebec was little changed.

Employment in resource-rich Saskatchewan was little changed in February, though growth of 4.3 percent over the past 12 months has pushed the provincial unemployment rate down 1.1 percentage points to 3.8 percent, the lowest since November 2008 and the lowest among Canada's provinces.

In Alberta 4,200 new jobs were created in February, while 52,900 new jobs were added over the trailing 12 months, a 2.5 percent increase. Unemployment in the province remained steady at 4.5 percent, second only to Saskatchewan among Canadian provinces, as more people entered the work force. Alberta's gains were concentrated in professional services, trade, finance, insurance and real estate, while jobs were shed in public administration, manufacturing and oil and gas extraction.

Employment in services rose by 59,300 in February, while jobs related to goods production fell by 8,600. Professional, scientific and technical service jobs rose by 26,200, as retail and wholesale employment increased by 13,200 and food service and accommodation by 21,100. Private companies hired 29,200 workers in February, exceeding the 9,400 increase in public-sector jobs.

The Bank of Canada (BoC) also held its benchmark interest rate steady at 1 percent earlier this month, noting that it will likely remain unchanged for some time but hinting again that the next move will be "higher.” But BoC Governor Mark Carney, at the same time maintained the softer tone he adopted in January's statement on monetary policy, saying inflation will "remain low in the near term” in an economy with "material excess capacity.” Mr. Carney and company concluded, "The considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.” In January the BoC noted that a rate increase was "less imminent.” But Mr. Carney has signaled since April 2012 that the central bank's next move would probably be to tighten policy. At any rate, the longest period with no change to it benchmark in more than half a century will continue. The BoC forecasted in January that the Canadian economy will grow by 2 percent in 2013. In its statement earlier this month it said it expects growth "to pick up through 2013,” led by household spending, exports and investment.

The Canadian dollar has softened to its lowest levels since late June 2012 on a combination of myriad factors, likely including the potential impact of the US "sequester” on North American trade and continuing high price differentials between Canadian crude and US crude as well as the BoC's softer monetary stance in recent statements. But based on longer-term factors, such as the fiscal health of the Canadian federal government, the position of Canada relative to resource-hungry emerging Asian nations and its everlasting relationship with what remains the world's largest economy–one that continues to show signs of returning to a more normal economic condition and with which it forms the biggest bilateral trade relationship on the planet—the writer expects the softness in the loonie to be nothing but a short term event.