Canadian businesses upbeat about hiring, Bank of Canada survey suggests

By Craig Wong, The Canadian Press
OTTAWA - Businesses across the country are planning to kick their hiring into high gear over the next year, according to a Bank of Canada survey that found corporate Canada in a generally upbeat mood.
"The balance of opinion on employment has risen to a record high level," the bank said in its summer business outlook survey released Monday.
"Intentions to increase employment over the next 12 months were widespread across all regions and sectors, particularly in the services sector."
The central bank said 57 per cent of the firms surveyed expected to hire new workers over the next year compared with just four per cent of firms that expected to have fewer employees over the next 12 months.
The Bank of Canada's report followed a better-than-expected Canadian employment report on Friday. Statistics Canada reported a net gain of 28,000 jobs for June, the third consecutive month of gains, which was in stark contrast to a disappointing report of only 18,000 jobs added in the United States.
The central bank survey was taken between May 24 and to June 16.
BMO Capital Markets senior economist Michael Gregory noted that businesses may not be as upbeat today as they were when the survey was done due to the turmoil in the global economy.
"But even if business expectations have become moodier, they still started from a position of relative, absolute and surprising strength," Gregory wrote in a note to clients.
"The survey is telling the Bank of Canada that its very accommodative monetary policy is doing a good job in stimulating the economy, closing the output gap and pushing underlying inflation back up to target."
The report also found that 25 per cent of firms faced difficulties finding workers and were limited in their ability to meet demand, suggesting there was less slack in the labour market than a year ago.
However the bank noted that the share of firms facing labour shortages was below the survey average.
The report comes as the Bank of Canada governor Mark Carney prepares to make his next interest rate announcement next week.
However, despite the positive outlook on the jobs front, the survey did little to push economists to change their belief that the Bank of Canada would likely keep its policy setting at one per cent.
"Key to our outlook for the Bank of Canada’s overnight rate is the combination of the improving domestic growth outlook and rising inflation expectations," TD economist Francis Fong said in a note.
"At this point, we feel that the increasingly dire situation in Europe and protracted softness in the U.S. are likely to keep the Bank on hold for the remainder of 2011 – however, we must concede that rising domestic inflationary pressures could potentially push them off the sidelines if they prove to be non-transitory."
The central bank also said Monday that its survey found on balance that firms saw an increase in sales growth over the past year and that they expect sales to rise even faster over the coming year.
The bank said strong commodity demand is fuelling the view by companies in Western Canada that sales growth will accelerate over the coming year, while those in the rest of Canada expect stable growth.
"Firms based in Central and Eastern Canada generally expect sales growth to be similar to that over the past 12 months, given an economic background characterized by continuing softness in U.S. demand, strong competition and a high Canadian dollar," the central bank said.
"Nonetheless, a number of firms reported that they expect to benefit from recent efforts to reposition their businesses or diversify their markets."
In its senior loan officer survey, the Bank of Canada says lending conditions in Canada for businesses are continuing to ease.