OTTAWA (Reuters) – Canada's economy lost 45,900 jobs in December and the unemployment rate rose to 7.2 per cent from 6.9 per cent in a surprising setback that may add pressure on the central bank to consider cutting interest rates.
The employment data released by Statistics Canada on Friday was the weakest since March 2013. The report also showed hiring in 2013 was the slowest since 2009, with year-on-year employment gains in December of just 0.6 per cent, or 102,000.
The Canadian dollar weakened immediately after the jobs data to a session low of C$1.0918 to the U.S. dollar, or 91.62 U.S. cents.
U.S. December employment data released on Friday was also weak, with employers hiring the fewest workers in almost three years.
Analysts in a Reuters poll had forecast, on average, Canada would see a gain of 14,600 jobs in the month, following three months of modest increases.
"It certainly suggests the economy ended 2013 on a sour note, and will simply reinforce the downward trend in the Canadian dollar," said Doug Porter, chief economist at BMO Capital Markets.
Statistics Canada’s survey of households to produce the data was conducted before the extreme cold weather hit many parts of Canada in December, although harsh conditions are not unusual for that month. "I don't think I'd want to lean on that crutch too heavily," said Porter.
Canada's economy, which outperformed the United States when it quickly recovered from the 2008-09 recession, has been stuck in the doldrums more recently as exports fail to bounce back and businesses remain wary of investing.
Bank of Canada Governor Stephen Poloz has been signaling since October he is just as likely to cut interest rates as to raise them, citing chronically weak inflation and the struggling economy. This week he told CBC television rates will be on hold until the data persuades the bank otherwise.
But one month of employment numbers is unlikely to produce a major policy shift at the bank, analysts said, especially since the job numbers tend to be volatile from month to month.
However, it does lend credence to those in the market who see a rate cut as a growing possibility.
"It certainly is going to raise some eyebrows at the Bank and will ramp up the chatter about the remote possibility of them even cutting rates," said Porter.
The central bank has held its main overnight target rate at 1.0 per cent since September 2010.
Overnight index swaps, which trade based on expectations for the policy rate, showed traders increased their bets of a rate cut this year after the jobs report.
The details of the December data were mostly negative, with losses spread evenly across the goods and services sectors. Educational services saw the biggest drop, shedding 18,500 jobs, followed by accommodation and food services, other services and construction.
Some 60,000 full-time positions disappeared in December, while 14,200 part-time positions were created. Private sector jobs shrank by 26,300 compared with an increase of 18,200 in the public sector.
Statistics Canada said the number of unemployed people looking for work in December rose by 66,900 from November, while the overall labour force grew by 21,000.
Wages for permanent employees rose two per cent in December year-on-year, down from 2.3 per cent in November.
© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.
To Read the Full Story, Subscribe or Sign In