Saturday, August 11, 2012

Canada surprises with big job losses in July

OTTAWA (Reuters) - Canada's economy unexpectedly lost 30,400 jobs in July in a third disappointing month for the labor market, indicating tepid growth that will likely keep the central bank on the sidelines for longer.

The dismal performance contrasts with new signs of strength in U.S. hiring and was worse than even the most bearish forecast in a Reuters survey. An average of 5,000 people lost their jobs in each of the last three months, according to the Statistics Canada data on Friday.

"It seems as if the global headwinds have caught up to the Canadian economy," said David Tulk, chief macro strategist at TD Securities.

The jobless rate climbed to 7.3 percent from 7.2 percent, with layoffs across a range of industries. The biggest job losses were in wholesale and retail trade and in professional, scientific and technical services.

The report bolsters suspicions that economic growth will stay below 2 percent, annualized, not fast enough to make Bank of Canada Governor Mark Carney hike interest rates.

Carney has been talking about tightening monetary policy since April and he sounded hawkish as recently as Wednesday. But he said he needs to see growth above "trend", estimated at about 2 percent, for rates to rise.

The Canadian economy, which survived the recession better than most of its trading partners, grew 1.9 percent in the first quarter and looks on track for a similar performance in the second.

"I don't think the market ever fully believed in the Bank of Canada's fairly hawkish tone, but it certainly dampens expectations for rate hikes in Canada," said Camilla Sutton, chief currency strategist at Scotiabank.

Most analysts don't expect the bank to make a move until the third quarter of next year.

Traders slightly scaled back their already modest bets on a rate hike in December after the data, according to overnight index swaps which trade based on expectations for the policy rate.

NOT ALL BAD

Some of the details in the monthly jobs report were slightly more encouraging. Some 21,300 full-time jobs were created but were eclipsed by the loss of 51,600 part-time positions.

Wages rose 3.9 percent in the year to July, up from 3.3 percent in June and the number of hours worked rose 1.2 percent over the same period.

On the other hand, there was little change in both public and private sector employment in the month, while the public sector has done all the hiring in the past year.

"The details are vaguely stronger than the headline would suggest ... However, all in all I think it's a significant disappointment for Canada and one that is likely to weigh into expectations for the Canadian dollar," said Sutton.

The Canadian dollar weakened to C$0.9970 against the U.S. dollar, or $1.0030, from about C$0.9948 just before the data's release.

U.S. jobs data last week showed that in July employers hired the most workers in five months and the number of Americans filing for jobless benefits unexpectedly fell last week.

Canada's jobs data, based on a household survey, are notoriously volatile month by month. But viewed as an average in the year to date, some 18,000 people found work each month. That is the equivalent of roughly 162,000 in the much larger U.S. economy, similar to the widely applauded July result.

Analysts have complained that Statscan's seasonal adjustments don't seem to properly account for big firing and hiring of teachers at the start and end of each summer, a factor in that volatility.

Atypically though, the sector created 11,700 jobs this past July in what one analyst called a "curve ball." Statscan noted that while there have been larger movements in educational employment in recent years, there has been no consistent pattern in the magnitude or direction of the changes.

(Additional reporting by Andrea Hopkins, Alastair Sharp, Euan Rocha in Toronto and Alex Paterson in Ottawa; Editing by Jeffrey Hodgson and Janet Guttsman)

Source: http://news.yahoo.com/canada-sheds-30-400-jobs-july-losses-part-123733507--business.html

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