07/06/2012 08:38 EDT | Updated 09/05/2012 05:12 EDT

Economy straining to keep momentum, adds modest 7,300 jobs in June

OTTAWA - Canada added a modest 7,300 jobs and the unemployment rate slipped to 7.2 per cent last month in a fresh indication the economy is straining to maintain momentum — but has not yet buckled.

The June employment number is the most up-to-date signal of how the economy is performing, and economists visibly breathed a sign of relief that the labour performance was not worse.

While the consensus estimate was for a gain of 5,000 jobs, some economists were predicted an outright decline, particularly after the stunning 140,000 gain of March and April that went against the run of weakening economic conditions.

"I'm never going to complain about a dip in the unemployment rate, and we did have a solid increase in hours worked in the month and the second quarter as a whole, which in some ways is almost a better measure," said Doug Porter, deputy chief economist with BMO Capital Markets.

"It could have been much worse," agreed Jimmy Jean, an economist with Desjardins Capital Markets.

In a statement, Finance Minister Jim Flaherty said the results show the country is on "the right track," but noted the fragility in the global economy, the United States and Europe.

"That's why were remain focused on measures to grow the economy ... like the hiring credit for small business and over $1 billion in new support for research and development," he said.

In the U.S., employers added only 80,000 jobs in June, a third straight month of weak hiring, while the unemployment rate was unchanged at 8.2 per cent.

The main surprise in the Statistics Canada report was that the unemployment rate inched lower one-tenth of a point to 7.2 per cent.

Normally, a few thousand new jobs isn't enough to reduce the rate — the agency doesn't even register 7,300 as a gain, preferring to say "little changed" given the margin of error in the household survey — but June also saw a 16,600 drop in the number of active workers which reduced the overall size of the labour force.

Regionally, there was an even split among provinces with employment increases as those with declines, but aside from Ontario — which added more than 20,000 jobs last month — the differences from the previous month were small in comparison to their populations, the agency said.

It was the second month in a row that Canada saw minimal job gains.

Still, given the size of the March and April increases, analysts said it is good news that the early gains were confirmed by May and June's numbers, rather than reversed.

And there were other aspects to like about the report, including that full-time employment rose by 29,300, offsetting a big decline in part-time work. In addition, the number of hours worked increased by 0.4 per cent and hourly wages rose 3.4 per cent on an annual basis, up from May's 3.0.

"People were working longer hours and getting paid more for their efforts," Porter said, adding that it should support consumer spending.

The June employment numbers probably will have few implications for the Bank of Canada's interest rate policy.

The Canadian central bank had appeared itching to begin raising interest rates during the spring, but seems to have backed off in recent weeks. With Thursday's stimulative moves by central banks in continental Europe, United Kingdom and China, a rate increase from the Bank of Canada appears to be on hold for some time to come, analysts said, with some looking as far into the future as 2014.

While June constituted a soft month for most workers, it was positively dour on the summer job front for students.

Employment as a percentage of their population among those aged 20-24 fell sharply to 63.2 per cent from 67.4 per cent in June 2011, matching the situation in 2009, when student employment was hit hard by the recession.

"(It) is also the lowest June employment rate since comparable data became available in 1977," the agency said.

Similarly, the employment rate among those aged 17-19 also fell, to 51.4 per cent, lower than existed in June 2009.

Most of the gains last month occurred in the public sector, which saw a large 38,900 gain, while the private sector shed 26,000 jobs. Self-employment fell by 5,500.

Statistics Canada said the biggest gains were in business, building and other support services, where employment rose by about 24,000. Health care and social assistance added 20,000 and there was a gain of 19,000 in educational services.

Offsetting the employment gains, the number of workers in the information, culture and recreation fields fell by 31,000, while there were 20,000 fewer agricultural workers in June. There were also minor declines in construction and manufacturing.