October 7, 2016 / 12:42 PM / 9 months ago

UPDATE 2-Canada jobs surge in Sept, but driven by the self-employed

3 Min Read

(Adds details, market reaction, background, byline)

By Leah Schnurr

OTTAWA, Oct 7 (Reuters) - Canada added far more jobs than expected in September, mainly because of the biggest increase in self-employed workers in more than seven years, data from Statistics Canada showed on Friday.

Economists did not expect the report, which has been volatile month-to-month, to move the Bank of Canada off the sidelines when it meets later this month. A senior policymaker said on Thursday there was still more slack in the labor market than the unemployment rate would suggest.

After cutting interest rates twice last year to offset the effects of plunging oil prices, the central bank is largely seen holding them where they are at least through next year.

The economy created 67,200 new jobs last month, handily topping the increase of 10,000 that analysts had forecast. The unemployment rate held at 7.0 percent, as expected, as slightly more people were looking for work.

But 50,100 of those jobs went to Canadians who consider themselves to be self-employed, the biggest monthly increase since June 2009.

"Behind Canada's great headline increase in employment, the details for September were still soft," said William Adams, senior international economist at PNC Financial Services Group.

Still, Adams said, given September's employment growth, recent economic improvement and the gain in oil prices, the Bank of Canada is likely to hold rates through the end of 2017.

The Canadian dollar strengthened against the greenback following the report. Traders were also absorbing the U.S. jobs report, which showed employment growth there unexpectedly slowed for the third straight month.

Much of Canada's increase in self-employed positions was in the health care and social assistance sector, according to the statistics agency. But that was offset by a decrease in public sector jobs within the industry, leaving it down a net 14,300 jobs.

Overall, the service sector led the way in job gains, with public administration adding 18,900 workers, while educational services jobs increased by 16,700.

The goods-producing segment of the economy fared well, with construction adding 6,400 jobs and manufacturing, 6,300.

For the third quarter, job gains were up just 0.3 percent, following little change in employment in the second quarter and a 0.2 percent improvement in the first.

Additional reporting by Fergal Smith in Toronto; Editing by Chizu Nomiyama and Lisa Von Ahn

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