Canada Posts First Job Gain in Four Months on Finance
Canada recorded a surprise job gain in August, the first in four months, suggesting the country is emerging from its first recession since 1992.
Employment rose by 27,100, Statistics Canada said. The jobless rate increased to 8.7 percent from July’s 8.6 percent, the highest since January 1998, as the labor force grew faster than employment. Economists surveyed by Bloomberg predicted a job loss of 15,000 and unemployment at 8.8 percent.
“This is very typical of what you see as the economy is emerging from a recession,” said Sheryl King, head of Canadian economics and strategy at Merrill Lynch Canada in Toronto. “We’ll take it.”
The Canadian currency appreciated as much as 1.2 percent to C$1.0887 per U.S. dollar, the biggest intraday advance since Aug. 27, before trading at C$1.0936 at 9:22 a.m. in Toronto, from C$1.1019 yesterday. One Canadian dollar purchases 91.45 U.S. cents.
The unexpected gain may help Conservative Prime Minister Stephen Harper fend off attacks from opposition parties seeking to oust him over his handling of the economy. Parliament resumes Sept. 14, and Liberal Leader Michael Ignatieff said three days ago his party will no longer support the government.
Part-Time Jobs
The employment gain was led by 30,600 part-time jobs, while full-time positions declined by 3,500. Retailers and wholesalers hired 21,200 people and financial and real estate companies added another 17,500.
The job report is also the last major piece of data due before the Bank of Canada’s Sept. 10 interest-rate decision. Governor Mark Carney said in July the economy started growing again this quarter, and committed to keeping his key lending rate at a record low 0.25 percent through next June if the inflation outlook doesn’t change. The jobless rate will likely keep rising even as the economy resumes growth, Carney said.
“Our customers continue to be prudent,” Pat Finelli, chief marketing officer of Pizza Pizza Royalty Income Fund, said on an Aug. 7 earnings call. “Ontario and Alberta’s economies continue to suffer from job losses and low discretionary income.”
U.S. Report
The U.S. jobless rate in August jumped to 9.7 percent, the highest since 1983, and employers cut another 216,000 jobs. Rising unemployment underscores Treasury Secretary Timothy Geithner’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy.
Canadian average hourly wages rose 3.3 percent in August from a year earlier, the slowest advance in more than two years, Statistics Canada said today business card.
Manufacturing employment fell by another 17,300 in August, bringing the total loss over the prior 12 months to 231,300, or 12 percent, Statistics Canada said.
Manufacturers have been among the hardest hit by the recession and the effects of a stronger currency. U.S. orders of lumber and automobiles have been slashed, and Bank of Canada Deputy Governor Timothy Lane said Aug. 25 that persistent strength in the country’s currency is an “important risk” to the economy. A stronger currency makes factory goods less competitive.
“I don’t think it does anything material to alter the Bank of Canada’s path” on interest rates, said Derek Holt, economist at Scotia Capital in Toronto.
Construction Rebound
Other companies made up for the factory job losses in August. Employment at private companies rose by 49,200, while government jobs fell 11,500 and self-employment declined by 10,600.
Construction employment rose by 12,100 and professional and scientific services jobs rose 10,400.
Harper’s government expects a record C$50.2 billion budget deficit this year, on higher infrastructure expenditures, jobless benefits and aid for the auto industry. Ignatieff and New Democratic Party Leader Jack Layton have said Harper must also further loosen requirements for unemployment benefits to allow more to qualify.
Unemployment will peak at 9.3 percent in the first quarter of 2010, according to a Bloomberg News survey. That suggests joblessness may reach a lower peak than the 12.1 percent rate set in November 1992 during the country’s last recession.
Most job losses tied to the current slowdown came in the first few months after employment peaked late last year, Statistics Canada said today. Of the 387,000 firings since October, about 357,000 happened in the next five months.
The labor market has “reversed itself,” said Paul-Andre Pinsonnault, an economist with National Bank Financial in Montreal, one of four economists out of 21 surveyed who correctly predicted job creation. “The labor market recovery will be sustained.”
Statistics Canada said Aug. 31 that the economy shrank at a 3.4 percent annualized pace in the second quarter. The economy will grow at nearly a 1 percent pace this quarter, accelerating to 2.9 percent by the second quarter of next year, according to economists surveyed by Bloomberg News.