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By David Berman

Canadian employment numbers might not move stock markets, but they certainly have the power to move the Canadian dollar. After Statistics Canada reported on Friday morning that employers added 17,900 jobs in March, the loonie fell about a third of a cent against the U.S. dollar, to 99.5 cents (U.S.).

Why? While the job gains added to the impression that the economy is in recovery mode, they fell short of more robust expectations for gains of 26,000. As well, full-time positions actually fell. Meanwhile, the jobless rate held steady at 8.2%, a little worse than expectations for a dip to 8.1%.

This suggests that the Bank of Canada might not be in such a rush to raise its key interest rate after all, in contrast to earlier, more hawkish, impressions that had driven the dollar higher.

Still, economists believe that rates are headed higher sooner rather than later, and these latest jobs figures haven't changed their minds. Here are a few comments:

Grant Bishop, TD Securities:

“The job numbers for March confirm a more moderate pace of recovery and are more consistent with the pace of growth anticipated by the Bank. These employment numbers allow the Bank some breathing room, insofar as a more gradual uptake of economic slack does not require aggressive removal of monetary stimulus to ease potential inflation pressures. With recovery now proceeding at a sustainable clip, we remain confident that the initial interest rate hike of a quarter point will come in July 2010, rather than ahead of the end of the conditional commitment.”

Krishen Rangasamy, CIBC World Markets:

“The [labor force survey] was not a barnburner report that would have raised expectations of the Bank of Canada bringing forward interest rate hikes. Wage inflation remains well under wraps. But it’s clear that the economy is gathering speed and the output gap is closing, something that will have the Bank of Canada start its tightening cycle in July. Looking further ahead, a second half slowdown in the Canadian economy should result in a more tepid pace to hiring, something that could cause the unemployment rate to creep up marginally towards year end.”

Yanick Desnoyers, National Bank Financial:

“Going forward, we expect manufacturing and transportation to benefit significantly from the strong inventory rebuilding cycle that is unfolding. With the wage bill up a solid 4.1% in Q1, we believe that the Bank of Canada will have no choice but to acknowledge once again that the Canadian economy is stronger than it expected. We reiterate our forecast that the Bank of Canada will increase its policy rate at the June meeting.”

Source: Canada: Despite Weak Jobs Report, Higher Interest Rates Are Still Upcoming