Canadian employers shed jobs for the first time since March last month, a sign the labour force lost momentum over the summer as the economy softened and business confidence faded.
Employers unexpectedly cut 5,500 positions in August, the second month in a row that job growth has stalled. The country’s unemployment rate rose a notch to 7.3%, Statistics Canada said Friday.
The stalled jobs numbers are bound to cause concern for policy makers, given that the unemployment picture south of the border is showing little signs of improvement. Prime Minister Stephen Harper said Thursday that his government is prepared to be "flexible" in responding to worsening global economy, suggesting a shift in priority towards job creation.
In Canada, the report comes after the economy contracted in the second quarter of the year. Deteriorating economic conditions in the U.S. and Europe prompted the Bank of Canada to hold interest rates steady this week, saying the need for rate hikes has diminished.
Economists had expected employers to have created about 22,000 positions amid teachers’ hiring with an unchanged jobless rate.
While job growth clearly stalled this summer, it comes after a robust streak for the labour market. In the past year, employment has grown by 1.3%, or 223,000 positions, primarily in Ontario and Alberta, and in the private sector, Statscan noted. In this time, full-time employment has grown 2.2% while part-time work has fallen 2.3%.
Finance Minister Jim Flaherty reiterated that the Canadian economy has created 600,000 jobs since the recession ended in July 2009. He is seeing the creation of more full time jobs "and that’s encouraging," he said in Marseilles, France, where he is attending a Group of Seven meeting.
The economy churned out 25,700 full-time jobs last months while losing 31,200 part-time positions.
The goods-producing side of the economy led the losses. Reductions came in the construction, transportation and warehousing along with natural resources industries, outweighing an increase in the health care and social services sector.
Employment rose in Nova Scotia last month, but declined in Saskatchewan and Newfoundland and Labrador.
Losses came among workers aged 55 and over -- a group that has since steady gains over the past year -- offsetting employment increases among people aged 25 to 54.
The weaker-than-expected reading "will feed into fears that the Canadian economy will not rebound as sharply from its second-quarter dip as policy makers would like to see," said Avery Shenfeld, chief economist at CIBC World Markets.
The average jobless rate for students aged 15 to 24 was 17.2% this summer – higher than the 16.9% rate for the summer of 2010 and much higher than the rates in the summers of 2006 to 2008, which were below 14%. The average number of hours worked by students was among the lowest since record-keeping began in 1977, at 24 hours per week.
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