OTTAWA - Canada unexpectedly lost jobs in November, driving the unemployment rate to its highest level since June and giving the Bank of Canada more reason to leave interest rates unchanged next week.
The economy lost 18,600 jobs in the month following a hefty 54,000 drop in October, Statistics Canada said on Friday. As a result, the unemployment rate climbed to 7.4 percent from 7.3 percent.
Analysts surveyed by Reuters had forecast, on average, a gain of 19,100 jobs with the unemployment rate holding steady.
“What’s a bit troubling with this number is that it’s now the second month in a row of job losses in Canada and totals over 72,000 in the last two months,” said Blake Jespersen, director of foreign exchange sales at BMO Capital Markets.
“That really sets up for next month. If we see a third job loss in a row I think that is very troubling for Canada,” he said.
The Canadian dollar weakened after the news to C$1.0131 against the greenback, or 98.71 U.S. cents, from around C$1.0089 versus the U.S. dollar, or 99.12 U.S. cents just before the data.
Some of the details of the report, however, suggested underlying strength in the economy, as the creation of 34,600 full-time jobs partially offset the disappearance of 53,300 part-time positions.
The private sector did most of the hiring in the month, and the new jobs were in higher-paying goods-producing industries like construction, while services such as retail and wholesale trade shrank their payrolls.
This helped boost wages by 2.6 percent in November year-on-year, compared with just a 1.3 percent gain in October, as measured by the average hourly wage of permanent employees.
Canada lost fewer jobs during the recession than the United States and its unemployment rate remained lower. By January, the economy had recovered all the jobs lost during the downturn and employment was up 1.2 percent in November from a year earlier.
But the weakness in Canada’s main trade partner, the United States, and the European debt crisis has undermined business confidence and weakened the job market again.
DOVISH STANCE
The employment report is the last major data point before the central bank’s final monetary policy decision of the year on Tuesday at 9 a.m. (1400 GMT).
“It feeds into the (Bank of Canada’s) more dovish stance, (which) has been build on the external environment as opposed to the domestic environment,” said Camilla Sutton, chief currency strategist at Scotia Capital.
“Generally November was filled with positive data surprises for the Canadian economy, including Q3 GDP. But the fear is what’s coming ahead, so having two disappointing jobs numbers in a row will certainly concern the Bank of Canada and keep the expectations for the bank fairly dovish.”
Economists expect the bank to keep its key overnight rate at 1 percent and hold it there until the fourth quarter of next year, while traders have priced in a cut at some point next year.
