By Malcolm Morrison, The Canadian Press

TORONTO — A solid employment report showing the strongest U.S. job growth in almost three years should give stock markets a lift this coming week.

The U.S. Labour Department reported Friday that the economy created a total of 162,000 jobs during March. But investors were particularly relieved at data showing that the private sector was responsible for 123,000 of those positions, the most since May, 2007.

“Very positive (and) showing steady job growth,” said Jennifer Lee, senior economist at BMO Capital Markets.

“Some people will pooh-pooh the report and say it’s just a month. And that’s true: it’s just one month but the fact that the private sector increased so much, that’s the main part.”

Monday will be the first chance investors have to react to the employment report as stock markets in Canada, the U.S. and many other countries were closed for the Good Friday holiday.

Lee noted that the report is part of a wider trend showing a continuing recovery from the worst recession in decades.

Data released in the U.S. last week showing rising house prices from December to January, improving consumer confidence and greater than expected expansion in the manufacturing sector — not just in the U.S., but also in the eurozone and China — sent stock markets in Toronto and New York higher last week.

“The global economy is in much better shape than the U.S. but even in the U.S., you’re making some progress,” said John Johnston, chief strategist The Harbour Group at RBC Dominion Securities.

“And the odds of a double dip in the U.S. are quite limited. The equity markets are reflecting the fact that we’re in a sustainable recovery, even if there’s some ebbs and flows.”

The Canadian employment report for March will be released Friday.

It is expected to be positive as economists forecast that the Canadian economy cranked out about 25,000 jobs last month, on top of just under 22,000 jobs in February.

“I think what we’re seeing is underlying job growth in Canada,” added Johnston.

“The trend is improving, the economy has picked up momentum. And the demand side is coming on, profitability is improving which means that capital investment is improving which means jobs both in Canada and the U.S.”

The data could drive the Canadian dollar to parity with the U.S. dollar for the first time since July, 2008 — if it doesn’t happen before then. Rising commodity prices helped push the loonie to just over 99 cents US at the end of last week.

Economists widely expect the loonie to hit parity sooner rather than later because of the solid economic recovery in Canada and the increased likelihood that the Bank of Canada could move to hike interest rates from near zero as early as June 1.

But while a move to parity wouldn’t be a surprise, the loonie could just as easily backtrack as it did during March when the U.S. dollar strengthened during the latest set of worries about the European debt crisis.

And Lee observed that the American currency could strengthen this week, depending on the content of the minutes of the latest Federal Reserve meeting on interest rates, which is being released Tuesday.

“It would be interesting to see if there are any more attentive signs toward exit strategies,” said Lee, since a sign that the Fed could be set to raise interest rates could bolster the greenback and weaken the Canadian dollar