Job seekers line-up at various booths at the National Job Fair and Training Expo in the Metro Toronto Convention Centre.Fernando Morales/The Globe and Mail
Better prospects are luring Canadians back into the job search.
Hiring surged at the beginning of the year as business services such as call centres and employment firms added jobs, Statistics Canada said Friday, a sign that employers are gaining confidence in the sustainability of the economic recovery.
But as more people went hunting for jobs, joining the labour force, the unemployment rate climbed to 7.8 per cent from 7.6 per cent. As a brightening jobs picture is likely to draw more people into looking for work, the unemployment rate is not expected to budge much this year.
"If the unemployment rate is going to go up, this is a good reason for it to go up," said Stephen Gordon, professor of economics at Laval University in Quebec City. "This is a story of people who might have given up in the job market during the recession, deciding things are now good enough that it's worth taking a look at the job market."
Like others, including Finance Minister Jim Flaherty, Prof. Gordon thinks the rate won't come down this year because of that effect. "It's going to take a longer period of sustained job growth to bring it down."
Employment rose by 69,200 jobs in January, far surpassing expectations and the most since last April, as women found work and both the private and public sectors expanded. The size of the labour force rose by 106,400.
As he prepares a March budget that could serve as the trigger for an election campaign, Mr. Flaherty has been careful to stress that it will likely be years before the economy, while improving, grows quickly enough to put a big dent in unemployment.
The labour market is intensifying as a political issue, with the Harper government resisting calls to cancel the last phase of corporate tax cuts, saying the measure helps create jobs over the long term. Opposition parties say there are more effective ways for Ottawa to boost employment, and argue the focus should be on creating jobs now.
Even as the economy benefits from a rosier outlook for the United States - Canada's main export market - the group of private-sector economists that Mr. Flaherty consults as he crafts his fiscal plans says the jobless rate will average 7 per cent or higher through 2013, before improving to 6.6 per cent by 2015. Canada's jobless rate was 6.1 per cent in October, 2008.
Economists who met Tuesday with Mr. Flaherty said their latest projections may not have fully captured the likely jolt that the crucial U.S. recovery will get from a tax-cut package agreed to late last year. Analysts said Friday the increase in hiring on this side of the border was likely helped by steps taken to spur a faster recovery in the United States. The rise in the Canadian unemployment rate was also likely a product of a perception - largely among young people who had opted to go to school or given up on their job search - that a boost in the U.S. would mean more work becoming available in Canada.
Canadian employers are moving off the sidelines after months of being frozen, said Sussannah Kelly, executive vice-president at search firm DHR International in Canada.
Hiring is strongest in the Prairies, she said, and companies are also ramping up hiring for overseas positions in Brazil, Mexico, India and China.
Most economists said Bank of Canada Governor Mark Carney would not be swayed by the January figures. Mr. Carney is unlikely to start raising interest rates again before May, or even later, they say, having emphasized in recent weeks that the economy will be restrained for at least the next two years by a strong currency and weak productivity growth. Both are crimping the private sector's ability to pilot the next phase of the recovery.
Tavia Grant