Canada’s Jobless Rate Rises to 7.6% as Employment Growth Stalls in January

Canada’s unemployment rate rose to a nine-month high in January as the trend of sluggish job creation that began in the second half of last year continued.

The jobless rate rose to 7.6 percent from 7.5 percent as employment increased 2,300 last month, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News had forecast unemployment to stay at 7.5 percent and 22,000 jobs to be added.

Consumers will account for more than half of Canada’s 2 percent economic growth this year, according to the Bank of Canada, as weak global demand and a high dollar curb exports. Most of the past year’s job growth came in the first six months of that period, Statistics Canada said, which suggests consumer spending growth may be restrained.

“It will weigh against a Bank of Canada rate increase anytime soon, and suggests the Canadian consumer could continue to pull back, not just in the face of elevated debts but also because of weaker job growth,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

The Canadian report contrasted with U.S. figures, which showed payrolls increased by 243,000 in January, bringing the U.S. jobless rate down to 8.3 percent, its lowest in three years. Canada’s jobless rate has been below that of the U.S. since October 2008, and the gap between the two rates is the narrowest since April 2009.

Dollar Strengthens

The Canadian dollar reached a three-month high today, and strengthened 0.6 percent to 99.34 cents per U.S. dollar at 2:21 p.m. Toronto time. One Canadian dollar buys $1.0066. It touched 99.28 cents, the strongest since Oct. 31. The yield on the 2- year government bond rose 5 basis points to 1.04 percent.

The challenge facing Canadian manufacturers was highlighted by Caterpillar’s announcement today that it was closing the Electro-Motive railway factory in London, Ontario. “The cost structure of the operation was not sustainable and efforts to negotiate a new, competitive collective agreement were not successful,” the Peoria, Illinois-based company said in a statement.

The Canadian Auto Workers Union said in a statement its 465 members at the plant were left vulnerable by federal foreign investment legislation that doesn’t penalize companies for job cuts.

“We sympathize with the workers in London,” Richard Walker, spokesman for Industry Minister Christian Paradis, wrote in an e-mailed comment on the closing. “Our government has taken strong measures to protect Canada’s manufacturing sector” including tax cuts and the tariff elimination, he said.

Factory Job Losses

Manufacturing employment has fallen by 2.5 percent in the 12 months through January and by 21 percent over the last decade. Canada’s relatively strong dollar makes the country’s goods less competitive.

Part-time employment rose by 5,900 in January while full- time jobs decreased by 3,600. Workers classified as employees rose by 39,200 and self-employed workers decreased by 37,000, Statistics Canada said. Private-sector employment increased by 19,700 and public-sector jobs rose by 19,600.

Canada’s job gain was led by a 22,800 increase in education and another 18,800 in information, culture and recreation.

The biggest job decline was 44,800 in professional, scientific and technical services. Employment in finance, insurance real estate and leasing declined for a fifth month, by 23,200, bringing the 12-month drop to 49,700.

‘Head Above Water’

“These figures are consistent with an economy fighting to keep its head above water,” said Toronto-Dominion Bank deputy chief economist Derek Burleton.

Average hourly earnings of permanent employees rose 2.2 percent in January from a year earlier. The Bank of Canada says that figure is a key indicator of inflation.

Central-bank Governor Mark Carney kept his benchmark lending rate at 1 percent Jan. 17, prolonging the longest pause since the bank began using it as a policy measure in 1994.

“We’re simply not growing fast enough to really be bringing the unemployment rate down,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. “It might take a couple of years until we get through the fiscal tightening around the world that is in part responsible for the sluggishness.”

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

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

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