–Analysts Of Mixed Minds But See Slower Fourth Quarter

By Courtney Tower

OTTAWA (MNI) – Canadian employment’s September surge sent the
Canada dollar up markedly Friday morning for the fourth day and left
surprised analysts with mixed feelings about what it portends for the
Canadian economy the rest of the year.

The increase by 60,900, all in full-time work, reported Friday by
Statistics Canada, was taken by BMO Capital Markets as “warding off any
concern that the labor market is enduring a material slowdown.”

BMO economist Robert Kavcic added in a note to clients that “the
solid September employment report is good news in a period of economic
uncertainty, and will probably clip any expectations of Bank of Canada
rate cuts this year.”

Scotiabank’s Capital Markets Research analysts, Derek Holt and
Karen Cordes Woods, were not so sure, saying “we can’t be over the moon
on this report” as they said markets seemed to be Friday morning. The
Canadian dollar, at time of writing Friday, had risen by almost one cent
(0.9600) — a gain of 0.99% from Thursday’s close — to 97.30 cents
U.S., coming back after a recent period of decline as international
money moved to the U.S. dollar safe haven.

The Scotiabank analysts noted in a report that the gain in
September was led by 38,000 more workers in education, which is always
volatile with large gains and declines due to seasonal adjustment
factors. Private sector jobs fell 14,900, and, overall, hours worked
declined 0.3%, which they took to mean a likely hit to coming GDP
results for September.

“To avoid a decline in September GDP there would have to be a
sudden pickup in Canada’s thus-far moribund productivity growth,” they
said.

The increase of 60,900 jobs gives Canada’s third quarter a gain of
62,500 jobs, and yanked the quarter up from thoroughly tepid growth — a
decline of 5,500 jobs in August and growth of 7,100 in July. The 62,500
is a slowing down from the 109,000 new jobs in the second quarter and
85,800 in the first.

The Canadian average hourly wage, for all groups of employees, was
$23.05, a 1.5% increase over September last year and the third
consecutive month with the average hourly wage below 2.0%, and higher,
in the rest of 2011. The Scotiabank analysts see this as meaning
paychecks will be under further pressure with a downside risk to
consumer spending, despite the fact that so many more Canadians have
full-time jobs.

Senior economist Jacques Marcil at TD Economics saw the September
results as “somewhat mixed.” On the positive side, he said the 0.2% drop
in the unemployment rate to 7.1%, the lowest level since December of
2008, “extends the steady trending down” of that rate. But he was
unhappy with the manufacturing decline of 24,000, for a gain of only
13,000 or 0.8% in the past year, saying it is a “less than stellar”
barometer of the economy.

Marcil sees very tepid growth for Canadian employment in the fourth
quarter, perhaps 15,000 jobs, as global financial turmoil saps business
confidence. Even the more optimistic Robert Kavcic at BMO Capital
Markets sees employment as being “subdued:” in the fourth quarter and
economic growth only “modest.”

The analysts in their predictions, of course, were blown away by
the September employment results, none having come even close. The
consensus had been for an increase of 10,000 to 15,000 jobs, with the
bravest individual analyst standing all alone at 25,000.

** Market News International Ottawa **

[TOPICS: M$C$$$,MN$FX$,MAUDS$]