REPEAT: MNI POLICY: Jobs Report Doesn't Raise Odds Of BOC Hike

Repeats Story Initially Transmitted at 16:08 GMT Dec 7/11:08 EST Dec 7

By Yali N'Diaye

     OTTAWA (MNI) - The Canadian economy added far more jobs than analysts had

anticipated in November, sending the unemployment rate to a record low 5.6%, but

this should not increase the odds of a Bank of Canada rate hike in January as

wage growth moderated.

     A record 94,100 jobs were added in November, Statistics Canada reported

Friday, mostly full-time positions, which are more reflective of a stronger

business confidence than part-time jobs.

     Moreover, gains were widespread across sectors, led by services, and

concentrated in the private sector, all signs of a strong labor market.

--SLOWER WAGES THE SPOILER

     However, the puzzling slowdown of wage growth continues.

     Average hourly wage growth slowed to 1.7% year-over-year in November from

2.2% in October. For permanent workers, it slowed to 1.5% from 1.9%. Both rates

were the lowest since July 2017, confirming a decelerating trend since reaching

a peak of 3.9% - both overall and permanent workers - in May 2018.

     To be sure, the Labor Force Survey wage data are only one piece of the

BOC's wage-common measure of wage growth. Still, the wage-common measure has

also been on a slowing trend since reaching 3% in the fourth quarter 2017. The

BOC estimates that wage growth should be closer to 3% at this stage of the

cycle.

     In fact, it is interesting to note that in its policy statement on

Wednesday, the central bank did not mention wages, after having pointed out

their "moderate" pace in the October 24 statement, when it projected a "pick up

in the coming quarters."

     Friday's data clearly challenged that narrative.

--OIL PRICES, TRADE BIGGER ISSUES

     Slower wage growth combines with declining oil prices and ongoing

U.S.-China trade tensions to overshadow the strong jobs creation numbers, with

the BOC qualifying oil developments as a "shock" and warning it would be an

important decision factor.

     With the Organization of the Petroleum Exporting Countries having finally

reached an agreement on the size of oil production cuts Friday - 1.2 million

barrels per day from OPEC, Russia and other partners - the BOC might want to

take time to assess the impact on oil prices beyond a month. Its next rate

announcement is on January 9.

     While the OPEC agreement Friday is a positive outcome, developments related

to U.S.-China trade tensions continue to remain a key source of uncertainty for

an economy as open as Canada, particularly exposed to the fate of global growth.

The arrest in Canada of Meng Wanzhou, the CFO of Chinese tech company Huawei,

whom the U.S. wants extradited, is only worsening the relationship between the

U.S. and China.

     So for the BOC, even strong jobs creation and a record low unemployment

rate are unlikely to raise the odds of a rate hike in the near term.

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