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Canada seen adding 20,000 jobs in December

REUTERS FORECAST: The median forecast is for a net gain of
20,000 jobs in the month, following an unexpectedly strong
79,000-job gain in November. Forecasts range from -17,000 to

The median forecast for the unemployment rate is 8.5
percent, unchanged from the previous month. Forecasts range
from 8.4 percent to 8.7 percent.

FACTORS TO WATCH: Canada's labor market has been improving
at a faster pace than that of the United States, which confirms
economists' expectations that domestic demand, in particular
consumer spending, will fuel the economic recovery. A strong
employment gain in December would cement that view while any
unexpected job losses would cast doubts over the newfound
stability of the economy.

The labor force survey tends to be volatile from month to
month and is best looked at as an average over several months.
The average job gain over the six months to November was 7,000
per month. Unlike in the United States, there is no additional,
complementary data on the labor market to feed into forecasts,
so analysts tend to be conservative in their predictions and
are frequently off base.

In recent months, some upbeat headline job numbers have
masked the fact that a tough job market has led many to turn to
self-employment or part-time jobs, and that the government is
creating jobs while private sector hiring -- the true measure
of economic recovery -- has been flat. Analysts will scrutinize
the details for evidence of good quality, permanent jobs in
expanding sectors of the economy.

Exporters and manufacturers have been hardest hit by the
recession and job recovery has been slower in those industries
than in the services sector, where employment has recovered to
October 2008 levels. Markets will be heartened by job gains in
the goods sector, where there are still 324,000 fewer jobs than
in October 2008.

MARKET IMPACT: A second straight month of stronger than
expected job gains in December could trigger a rally in the
Canadian dollar, which is already getting a lift from rising
oil prices, on expectations that growth will be stronger than

Job losses or tepid gains could spark a selloff on fears of
a double-dip recession.

Markets largely expect the Bank of Canada to hold its key
interest rate at its lower limit of 0.25 percent until
mid-year, unless inflation suddenly appears headed to soar past
2 percent this year.
(Reporting by Louise Egan; editing by Rob Wilson)

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