BUSINESS

Canada Unemployment Rate: July Disappoints As 30,400 Jobs Disappear

08/10/2012 08:37 EDT | Updated 10/10/2012 05:12 EDT
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OTTAWA - The global economic slowdown has delivered a blow to Canada's jobs market.

The country shed a surprisingly steep 30,400 jobs last month — the first major hit in nearly a year for what had been a mostly positive employment record.

The July jobs report published Friday by Statistics Canada pushed the unemployment rate up a tenth of a point to 7.3 per cent.

Economists had been warning that employment growth was likely to moderate in the second half of 2012, but still had pencilled in a modest pick-up of about 6,000 new jobs for July.

Bank of Montreal economist Doug Porter predicted August's performance may be as bad, noting that Statistics Canada had still to register education sector layoffs that normally occur during the summer months.

"This is not good. It basically reinforces the picture that Canadian employers are turning very cautious," Porter said.

"I don't want to read too much into any one month's news, but ... we have a clear slowdown in employment. Perhaps the most telling statistic is that is that the unemployment rate made absolutely no progress in the past year. Effectively, job growth is now trailing a little bit behind population growth."

The report was particularly bad news in Quebec, which saw a loss of 28,700, the biggest in the country, at a time when the Jean Charest government is in a hard-fought campaign for re-election.

The Charest government can take solace in a slightly lower unemployment rate, which slipped to 7.6 per cent as an even bigger number of workers decided to drop out of the labour market, and all the jobs losses were part-time.

The last point was also true of the country as a whole. Nationally, July actually saw a 21,300 gain in full-time employment, which was more than offset by the shedding of 51,600 part-time workers.

Another silver lining was that average wages kept rising, to 3.6 per cent higher than a year ago.

Statistics Canada noted that job creation for the year remains solidly in the black with a cumulative increase of 124,600 in the first seven months, although the vast majority of those gains came in March and April.

Still, the report was surprisingly negative given the United States recorded a better than expected 163,000 jobs increase in July.

Capital Economics analyst David Madani said the Canadian job losses point to an underlying weakness in the economy, which has been growing at a rate below two per cent since last fall.

The Bank of Canada may need to revisit its stated bias leaning toward an interest rate hike as its the next policy action — whenever it comes, he said.

"Admittedly, the underlying details were better than the disastrous headline figure. All things considered though, this jobs report provides further support to our long-held view that the Bank of Canada may eventually be forced to cut interest rates."

In an interview with BBC earlier this week, bank governor Mark Carney went to great lengths to maintain the tightening bias, telling the interviewer that as long as growth remains above trend, "we may withdraw some of that monetary policy stimulus."

"If the economy were growing above trend, you'd expect to see the unemployment rate declining," Porter responded Friday.

"I think what's going on is the bank is bending over backwards to try and impress upon people that they have no intention to cut interest rates."

In detail, Statistics Canada said there were significant job losses in the wholesale and retail trade sector, which declined by about 30,000, while employment in the professional, scientific and technical services fell by 22,000, and public administration dropped 17,000.

On the goods producing side, manufacturing fell by 18,000 and construction was up by 11,000.

Offsetting the declines were gains in information, culture and recreation, up 24,000, and finance, insurance, real estate and leasing, which increased by 19,000.

In an unusual element of the report, employment among women aged over 55 fell by 30,100. The over-55 age group had seen strong job growth during the recovery.

Regionally, five provinces suffered job losses last month — Quebec, British Columbia, Manitoba, New Brunswick and Newfoundland. The only significant job gains came in Ontario, which saw an increase of 10,600.

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