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Canada's Economy Is Killing It But Good Times Won't Last: Analysts

The growth is "likely to prove unsustainable."

Canada's economy is killing it right now, by many accounts.

The country added about 41,000 jobs last month, defeating expected growth of 5,000 to 10,000, and unemployment fell from 7.3 to 7.1 per cent, according to TD Bank. Real GDP is expected to grow about three per cent year-over-year in the first quarter.

The country is on track to see the fastest growth in the G7 this year, Bloomberg reported.

"Alberta accounted for half the job gains in Canada in March and that is likely to prove unsustainable."

Much of the country's economic vigour is being driven by foreign demand — exports are averaging a "record high" for the quarter, TD added.

But bank economist Diana Petramala isn't exactly jumping for joy: "Not to put a damper on this parade, but the pop in economic growth in Q1 may prove temporary," she wrote.

The reason, she said, is that Alberta accounted for "half the job gains in Canada in March and that is likely to prove unsustainable."

"The Canadian Association of Petroleum Producers (CAPP) expects business investment in the oil and gas sector to contract by 62 per cent over 2015 and 2016 — which suggests that overall investment will remain a big drag on Canadian economic activity this year," Petramala said.

And Alberta, she added, has yet to feel the "second round effects from the drop in investment and employment in the oil and gas sector, suggesting that March's gains could be reversed fairly quickly in the months ahead."

Many of Canada's job gains happened in the services sector (25,000), but they also came as construction jobs fell by 5,500 and manufacturing lost 32,000 positions.

"We do not believe that the economy has suddenly transitioned to above-potential growth in a sustainable manner, and the big drop in factory jobs is a loud cautionary note in this release," BMO economist Doug Porter said last week.

There are nevertheless some encouraging numbers for the economy right now, though there's no certainty on how long they'll last.

The OECD sees signs of "growth stabilization" in Canada, while countries such as the U.S., the U.K. and Japan are expected to falter, according to Reuters.

Meanwhile, Bloomberg noted that credit to Canadian businesses was up 6.3 per cent year-over-year in February — and while it has slowed down, it is still above average for the past 25 years.

The growth is expected to keep Bank of Canada Governor Stephen Poloz from dropping interest rates in 2016, as he did twice last year when the country flirted with a recession.

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