Canada's roller-coaster ride of job creation continued in May with a whopping 94,900 new positions created -- more than six times what economists were expecting. This is the highest level of job creation in nearly 11 years, and it lowered the unemployment rate 10 basis points to 7.1%. More than 80% of the new jobs were of the full-time variety, and employment increased in Ontario, Quebec, Alberta, Manitoba and New Brunswick, although it declined in Prince Edward Island. All of the employment gains last month were in the private sector.
New Bank of Canada governor Stephen Poloz is in his first week of a seven-year term and already hinting at an interest rate hike, although we doubt it will happen anytime soon. The Canadian housing market continues to struggle and was recently named by the OECD as one of the most overvalued in the world. Canada has the second-highest price/rent ratio in the world, leaving itself vulnerable to a possible correction. Through the first four months of the year, housing starts in Toronto are down roughly 40% year over year. Given the tightening lending restrictions and choppy economic backdrop, we doubt the housing market would be able to digest a rate hike at this time.
