REPEAT:MNI:Analysts:Canada Jobs Report Raises Odds Of BOC Hike

Repeats Story Initially Transmitted at 18:02 GMT Jan 5/13:02 EST Jan 5

By Yali N'Diaye

     OTTAWA (MNI) - The December jobs report that, once again, surprised

analysts on the upside, is raising the odds of a Bank of Canada rate hike as

soon as this month, analysts said.

     In that regard, the central bank's own Business Outlook Survey (BOS) due

Monday could seal the deal.

     Statistics Canada reported Friday that the Canadian economy added 78,600

jobs in December, bringing the total gain for 2017 to 422,500, the largest

expansion since 2002. 

     The unemployment rate fell 0.2 percentage points to a record low 5.7%, with

the participation rate rising to 65.8% from 65.7%, while analysts had expected

the unemployment rate to tick up to 6.0%.

     On the wage front, average hourly wage growth for permanent workers

accelerated to 2.9% from 2.7% year-over-year, the largest increase since April

2016.

     So "a January rate hike now appears likely in light of the robust jobs

data," TD economist Brian DePratto told MNI.

     RBC analysts are also planning to change their BOC call to move the next

tightening to January, economist Josh Nye also told MNI.

--WEAK TRADE OVERSHADOWED

     The disappointing goods trade data also released Friday were overshadowed.

     Statistics Canada reported that the merchandise trade deficit widened to

C$2.5 billion in November from C$1.6 billion in October, while analysts had

expected an improvement.

     While exports increased 3.7% on the month, they only edged up 0.6% on a

real term basis. In fact, if not for autos and parts, real exports were even

down 1.4%.

     RBC Assistant Chief Economist Paul Ferley noted in a commentary that trade

data suggest net exports made no contribution to GDP in the fourth quarter.

However, that would still be an improvement from the previous quarter.

     In addition, growth is expected to remain above potential, he said.

"Confirmation of such is being provided by wage pressures starting to emerge as

evidenced by this morning's Canadian employment report."

     "Such an environment argues for policy to continue to tighten with recent

data pointing to the growing probability of a 25 basis point hike in the

overnight rate as soon as the next policy meeting January 17," Ferley commented.

     "Given the tremendous progress made in narrowing labor market slack - an

area highlighted by the Bank of Canada in recent communication," CIBC analyst

Nick Exarhos also said in a commentary, "that today's (jobs) report is enough to

push Governor Stephen Poloz into a rate hike later this month."

--WATCHING BOC SURVEY

     "It is clear that today's job report rises the probability of a rate hike

in January," Desjardins Senior Economist Mathieu D'Anjou told MNI, putting the

probability of a hike on January 17 at 50%.

     Should Monday's Business Outlook Survey come in strong, he continued, "we

may move our expectations for the next rate hike from March to January."

     However, Capital Economics analysts are not "convinced."

     "With NAFTA's future hanging in the balance, we still doubt that the Bank

of Canada will risk raising interest rates early this year, as markets now

expect," wrote Senior Canada Economist David Madani.

     "In addition, we also still believe that housing-related risks will prevent

the Bank from raising rates later this year."

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com