The Canadian economy added jobs in October with a surge in full-time hiring, and the unemployment rate dipped to a 40-year low, underpinning expectations that the Bank of Canada would keep raising interest rates.

Statistics Canada said on Friday that 11.2k jobs were created and the unemployment rate fell to 5.8% for the first time since July. The market had forecast a gain of 10k positions and for the jobless rate to remain at 5.9%.

The Bank of Canada on Tuesday reiterated that more interest rate hikes would be needed to achieve its inflation target and that now was the ideal time to remove monetary stimulus, given how well the economy was doing. Market expectations of an interest rate hike on December 5, as reflected in the overnight index swaps market, dipped to 28.43% from 30.29%.

Although full-time jobs rose by 33.9k compared to a loss of 22.6k part-time positions, the labor participation rate dropped to 65.2%, its lowest since October 1998.

The average year-over-year wage growth of permanent employees - a figure closely watched by the Bank of Canada - fell to just 1.9%, the lowest since the 1.7% recorded in August 2017.

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