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(Reuters) - Canada's economy more than tripled expectations by adding 63,800 jobs in September and wages continued to soar, data showed on Friday, upping the chances for another rate hike.
The jobless rate stayed at 5.5% for a third consecutive month, Statistics Canada said. Analysts polled by Reuters had forecast a net gain of 20,000 jobs and for the unemployment rate to edge up to 5.6% from 5.5% in August.
The average hourly wage for permanent employees rose 5.3% from September 2022, up from the 5.2% annual rise in August.
"That employment report today really blew away market expectations. Wage growth is also beating market expectations," said Michael Greenberg, a portfolio manager for Franklin Templeton Investment Solutions.
"Despite the aggressive rate hikes by the Bank of Canada, clearly demand remains strong and companies continue to hire. This suggests we could well see another rate hike in November or December," Greenberg said.
The central bank, which has hiked rates 10 times in the past 18 months, has stressed that it will be hard to fully curb inflation if wages maintain their current patterns of rising between 4% and 5% annually.
The monthly, seasonally adjusted and annualized gain for average hourly wages on permanent employees was 8.3% in September, said Derek Holt, vice president of capital markets economics at Scotiabank.
"Wages are just going off the charts," Holt said. "With wage numbers like this and the fact that we haven't had a soft patch on core inflation measures in Canada like they've had in the U.S., I would think we're still in hike mode in October."
Money markets increased bets for a rate increase later this month after the jobs figures were published. They now see about a 38% chance for a hike later this month compared to a 28% chance before the data.
The Canadian dollar edged 0.1% lower to 1.3718 per greenback, or 72.90 U.S. cents, as U.S. job growth also beat expectations.
The Canadian 10-year yield was up 12 basis points at 4.255%, trading near a 16-year high.
Canada's labor market, supported by strong immigration, has been resilient even as the Bank of Canada raised its key overnight rate to a 22-year high of 5% to cool the economy.
"The upward trend in employment continues to occur in the context of the highest rate of population growth since 1957," Statscan said, noting that the population aged 15 and older increased by 82,000 in September.
The Bank of Canada made its next policy announcement and updated its economic forecasts on Oct. 25.
With September's robust gains, the economy is averaging 30,000 monthly employment growth this year, up from 25,000 a month earlier.
Part-time employment growth, which has been outpacing a rise in full-time work this year, drove the gains in August with a net 48,000 positions added in the month, Statscan said.
Employment in the services sector increased by a net 74,300 jobs, mostly in educational services, and more than offset 10,500 positions lost in the goods sector.
Reporting by Ismail Shakil, Nivedita Balu and Steve Scherer in Ottawa; Additional reporting by Fergal Smith; Editing by Dale Smith and Mark Porter