Canada’s Economy Adds 7,100 Workers in July as Jobless Rate Drops to 7.2%

Canadian employers slowed their pace of job creation, cut back on wage increases and reduced purchases last month, data released today show, adding to evidence the country’s recovery is waning.

Employment rose by 7,100 on a seasonally adjusted basis, Statistics Canada said today in Ottawa, less than the 15,000 median estimate in a Bloomberg News survey of 27 economists and down from an average 36,300 over the prior three months. The annual increase in hourly wages also decelerated in July to its slowest since 2003, the agency said.

The report suggests Canada’s labor market may be softening, after the country led the Group of Seven countries in recouping employment lost during the global recession. Canada has added about 25,000 jobs on average each month since August 2009, as the economy benefited from rising prices for commodities and a buoyant real estate market propelled by low borrowing costs.

“The real concern is the ongoing reduction in the wage growth,” said Derek Holt, vice-president economics with Scotia Capital in Toronto. “It remains bearish for consumption going forward.”

In a separate report, the University of Western Ontario’s business school said its Ivey purchasing managers’ index fell to 46.8 in July, a six-month low, from 59.9 a month earlier.

Readings greater than 50 indicate purchasing by governments and companies advanced. Economists surveyed by Bloomberg predicted a reading of 61, the median of 9 forecasts.

Clouding the Outlook

Europe’s sovereign debt crisis and a growing risk of a new recession in the U.S. are clouding the longer-term Canadian employment outlook, said Paul Ferley, assistant chief economist at RBC Economics.

“The issue is sustainability. If the external problems deepen, it could get to the point where it will jeopardize our expansion and start pushing the unemployment rate higher,” Ferley said by a telephone from Toronto.

Canada’s gross domestic product fell by 0.3 percent in May, the most in two years, on temporary disruptions in the mining and oil and gas industries, Statistics Canada said July 29.

The Bank of Canada said July 20 the economy’s growth probably slowed to a 1.5 percent annual pace in the second quarter, the slowest rate since the country emerged from recession in 2009, amid a weak global recovery. Governor Mark Carney has kept the central bank’s benchmark policy rate at 1 percent since September.

Average hourly wages rose 1.4 percent in July from a year ago, down from 2 percent in the previous month, to reach the slowest annual pace since June 2003, Statistics Canada said.

Dollar Weakens

The Canadian dollar swung between gains and losses, rising 0.4 percent to 97.75 cents per U.S. dollar at 1:23 p.m. in Toronto. Bonds fell, with yields on 2-year government bonds gaining five basis points to 1.07 percent.

Job cuts by governments, which have been curtailing stimulus measures, offset employment gains in construction and transportation, Statistics Canada said. The economy created 94,500 private sector jobs during the month, led by a gain of 30,800 in construction employment. Retail and wholesale increased by 27,500 jobs, while transportation and warehousing businesses added 27,700 workers.

Public-sector employment declined by 71,500 in the month and the number of self-employed workers dropped by 15,900, the agency said.

Schools fired 30,000 employees in July. The statistics agency said that while there have been movements in summer educational employment in recent years, there hasn’t been a consistent pattern over that time.

Ferley said the Canadian job market, though, remains stronger than it appears in the July report, since the decline in education employment is likely a seasonal phenomenon that will be reversed once schools re-hire staff in the next few months.

Full-time employment rose by 25,500 during July while part- time jobs dropped by 18,400, the report said.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bbloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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