Nov. 6 (Bloomberg) -- Canadian employers unexpectedly fired workers in October and the unemployment rate rose more than forecast, suggesting the U.S.’s largest trading partner hasn’t fully recovered from the recession that began last year.

Employment fell by 43,200 last month, Statistics Canada said today in Ottawa, and the jobless rate rose to 8.6 percent from September’s 8.4 percent. The median forecast of economists surveyed by Bloomberg was for a 10,000 gain in jobs and an unemployment rate of 8.5 percent.

The report may make it easier for the Bank of Canada to fulfill its pledge to keep its benchmark lending rate at a record low until June 2010 to spur growth unless the inflation outlook changes materially. Finance Minister Jim Flaherty said yesterday he still expects “some weakness” in employment data, adding the labor market will recover when economic growth pushes companies to invest again.

The report is “a big disappointment,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, in an interview. “Our economy seems to be struggling out of the recession and the weak employment just fits into that trend.”

Guatieri said the employment figures add a “downside risk” to the central bank’s October prediction that the economy will grow at a 3.3 percent annual pace in the fourth quarter. He added the earliest he expects the bank to raise rates is July.

Currency Weakens

The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 0.9 percent to C$1.0751 per U.S. dollar at 4 p.m. in Toronto, from C$1.0651 yesterday. One Canadian dollar buys 93.01 U.S. cents.

The yield on the bankers’ acceptances futures contract due in September 2010 fell 7 basis points to 1.25 percent today on the Montreal Exchange. The level is the lowest since May and indicates investors are paring bets that interest rates will rise. There are 100 basis points in a percentage point.

“Today’s numbers show just how fragile the global economic recovery remains and we’re not out of the woods yet” Human Resources Minister Diane Finley told reporters in Toronto today, according to a transcript of comments sent by e-mail. The government will keep implementing its stimulus package, “a plan that is creating new jobs and providing tax relief while assisting those who have been hardest hit.”

“The recession may be technically over -- we’ll see the GDP figures in coming weeks -- but unemployment is still rising,” Pierre Paquette, a lawmaker from the opposition Bloc Quebecois, said in Ottawa. The government should do more to help workers in industries like forestry and aerospace, he added.

Part-time Declines

An increase of 16,500 in full-time jobs was more than offset by a 59,700 decline in part-time employment, the statistics agency said.

Retailers and wholesalers, as well as providers of “other services” such as auto mechanics, hairdressers and animal groomers, led the decline in October employment, with drops of 30,800 and 19,900 positions respectively.

“This is more indicative of our experience going forward,” said Stewart Hall, an economist at HSBC Securities in Toronto. “Our data is likely to look saw-toothed rather than V- shaped,” he said, referring to a recession that is followed by a strong recovery.

Governments, natural resource firms and manufacturers also reduced their workforce, the agency said. Ten of the 16 industries tracked by Statistics Canada recorded job losses.

Manufacturing Losses

Manufacturing firms shed 8,200 jobs, bringing the total job losses in the 12-month period to 217,700.

“Some of the manufacturing jobs aren’t coming back the way we expected them to,” Cynthia Devine, chief financial officer of Tim Hortons Inc., Canada’s largest fast-food chain, said in an Oct. 30 telephone interview. “We’re seeing that in regions like Ontario, which had a heavy reliance on the automotive industry and U.S. trading.”

Information, culture and recreation companies recorded a drop of 6,400 positions.

Torstar Corp.’s Toronto Star, Canada’s most widely read newspaper, plans to replace 100 unionized editors, almost a third of its newsroom, with journalists working on contract, probably outside the country, the newspaper’s union said. The Star’s management announced the changes on Nov. 3 as it made a buyout proposal to employees.

Construction, benefiting from rising home prices and a government stimulus package that targets the industry, added 11,200 jobs during the month. From a year ago, the industry has lost 72,500 positions.

Canadian average hourly wages accelerated to 3.3 percent in October from a year earlier, compared with 2.5 percent in the previous month, Statistics Canada said today.

In the U.S., the unemployment rate soared to a 26-year high of 10.2 percent in October and payrolls fell by 190,000, compared with a 175,000 drop anticipated by the median forecast of economists surveyed by Bloomberg News.

To contact the reporters on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

Last Updated: November 6, 2009 16:12 EST