Economists were shocked yet again by the strength of Canada’s job market in December. The strong upward trend in employment that began at the start of 2002 continued in December, with an increase of 58,000 jobs, mostly in full-time.

Over the year, employment rose 3.7% (+560,000), the highest annual growth rate since 1987.

Despite the job growth in December, the unemployment rate remained unchanged at 7.5% for the month, as a large number of persons entered the labour force.

“The performance of Canada’s job market in 2002 was enough to make even the most imaginative of economic commentators run out of superlatives, and this morning’s employment report was another case in point,” said TD Bank. “A shocker, a barn-burner, another head-spinning gain — call it what you wish, but the bottom line is that Canada’s job market has ended the year in grand style, running circles around its ailing U.S. counterpart.”

TD drew attention to the 58,000 positions added during the month, “blowing away market expectations yet again, and bringing the tally for the year as a whole to a whopping 559,600 jobs — the fastest pace of job creation in percentage terms since 1987.” And, it suggested that the most revealing indicator of the performance of Canada’s labour market over the past year is the employment rate — the percentage of the working-age population that is employed — which has risen to an all-time high of 62.4%.

Not only was today’s headline result strong, but the details were solid too, with most of the hiring coming in full-time positions. BMO Nesbitt Burns noted that the service sector accounted for all of the gains in December, with large increases in education, trade, and management & administrative support. Goods-producing sectors saw a decline last month, as manufacturing shed 25,300 jobs.

“A move to stretch more work out of each employee is likely to see the pace of hiring slow notably in 2003,” predicted CIBC World Markets. “An expected appreciation in the Canadian dollar would also look to weigh on the labour market in the year ahead. A stronger loonie will make it less attractive, relative to the US, to concentrate hiring in Canada.” Although, economists have been predicting a slowdown in hiring for the past six months now.

Nesbitt concluded, “The persistent, incredible strength of the Canadian labour market increases the likelihood that the Bank of Canada will be back in rate-tightening mode by the spring.”

TD concluded, “While this morning’s report will keep the Bank of Canada awake and on its toes, it is unlikely to change its policy stance – especially in light of this morning’s sour U.S. employment data. In fact, the ongoing increase in the labour force participation rate – and the resulting stickiness in the unemployment rate – suggests that the Canadian economy’s capacity limits are higher than initially thought. This leaves the central bank with enough wiggle room to hold the line on rates until next June.”