OTTAWA -- Canada's jobless rate dipped to a rare low of 6.7 per cent in June, suggesting the economy is growing at a quick enough clip to warrant higher interest rates by fall.
Such a low unemployment rate has been seen only twice since 1976 when Statistics Canada first began using current data-crunching methods: June 2000 and March 1976.
That suggests growth is strong enough that the central bank can't wait much longer to begin raising borrowing costs to head off inflation, said Marc Levesque, chief Canadian strategist with TD Securities.
"It's certainly enough to keep the Bank of Canada on track to tighten its monetary settings, over time," Levesque said yesterday.
London's unemployment rate slipped to 6.7 per cent last month from 6.9 per cent in May.
Most analysts expect the central bank will pass on its next opportunity this Tuesday to boost its key policy interest rate of 2.5 per cent and instead will wait until fall.
Central bankers are expected to outline their views on the economy Thursday in an update to their regular monetary policy report.
The likelihood of higher interest rates gave the loonie a sharp boost soon after the jobs report was released.
The currency closed up 0.63 cents to 82.01 cents US -- its highest close since April 1 -- after rising as high as 82.15 cents US during the day.
Markets are expecting a series of interest rate hikes beginning later this year from the central bank, said David Wolf, head of Canadian economics and strategy at Merrill Lynch Canada.
"It may well be related to this expectation that the upside to rates in Canada may be rising even as the upside to rates elsewhere in the world seems to be falling," Wolf said.
Adding to that, markets were pleasantly surprised by the drop in Canada's jobless rate -- even as they were disappointed that job creation south of the border was weaker than expected.
Employers in the United States added about 146,000 jobs last month, pushing down the unemployment rate to an even five per cent, the U.S. Labour Department said yesterday.
That's a four-year low.
In Canada, the drop in the June jobless rate from 6.8 per cent in May surprised markets, which had expected greater job creation but a stable unemployment rate.
"This is significant from our central bank's standpoint -- the rate dropping to 6.7 per cent, which is the lowest level reached in the history of the data series and matches the low point recorded in June 2000," said Levesque.
"Clearly, there isn't much slack remaining in Canada's labour market."
Instead of the expected 20,000 additional jobs, only a net 14,200 jobs were reported in June.
A whopping 52,000 full-time positions were added to the economy, but those gains were partly offset by the loss of about 38,000 part-time jobs.
Still, more than 1.1 million Canadians were looking for work last month, Statistics Canada said.
However, the overall picture suggests strength is building in the economy.
Statistics Canada says total employment rose by 79,000 or by 0.5 percentage points in the second quarter of this year.
That's three times the growth rate observed in the first three months of 2005.
NATIONAL STATISTICS
Canadian June jobs figures (May in brackets):
Unemployment rate: 6.7 per cent (6.8)
Number unemployed: 1,162,100 (1,178,100)
Number working: 16,167,300 (16,153,100)
Youth (15-24 years) unemployment: 12.8 per cent (12.5)
Men (25 plus) unemployment: 5.5 per cent (5.7)
Women (25 plus) unemployment: 5.6 per cent (5.7)
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