Canada unexpectedly lost jobs for the first time in five months in August, led by goods-producing industries such as construction and natural resources.
Employment fell by 5,500 after rising by 7,100 in the previous month, Statistics Canada said today in Ottawa, and the jobless rate rose to 7.3 percent from July’s 7.2 percent, which was the lowest since December 2008. Bloomberg News surveys called for job gains of 21,500 and unemployment to stay at 7.2 percent.
Thirty-year government bond yields fell to as low as 2.853 percent, the lowest in Bloomberg records dating to 1990, as the report signaled a stagnating job market following the second quarter, when the economy shrank for the first time since the 2009 recession. Separate reports today showed housing starts declining at the quickest this year and worker output per hour falling at the fastest pace in five years.
“I’m concerned about third-quarter growth in Canada,” said Derek Holt, Scotia Capital’s vice president of economics in Toronto. There are signs domestic demand is “falling to pieces,” such as rising inventories, slower business investment and housing, he said. “Let’s cross our fingers and hope the consumer comes through in this picture.”
The Canadian dollar depreciated 0.7 percent to 99.60 cents per U.S. dollar at 10:56 a.m. in Toronto, from 98.95 cents yesterday. One Canadian dollar buys $1.0040. The yield on Canada’s 2-year government bonds dropped 5 basis points to 0.84 percent.
Goods Producers Drop
Work fell by 40,100 in goods-producing industries in August and rose by 34,600 in services, today’s report showed. Construction companies fired 24,300 people to lead the decline, followed by 11,500 workers from natural resources firms.
The drop in employment comes after hourly worker output fell at the fastest pace in five years in the second quarter. Labor productivity slid 0.9 percent as output dropped and hours worked rose, Statistics Canada said in a separate report.
Canada Mortgage & Housing Corp., a government agency, said the pace of home construction starts fell 9.7 percent in August, the fastest rate this year.
The Bank of Canada said two days ago the need to raise interest rates has “diminished” because a fading global recovery will ease inflation pressures. The bank held the key rate at 1 percent, where it’s been since last September.
Private Sector Decline
Private employment fell by 20,600 in August, while government jobs rose by 22,000. Health-care and social assistance jobs rose by 50,100.
Among companies cutting jobs is Transcontinental Inc., which said Aug. 30 it will fire about 30 workers as it moves some printing equipment to a central location in Montreal.
“Our first priority is to move our economic recovery forward, and ensure Canada’s economy continues to create jobs,” Prime Minister Stephen Harper told a meeting of Conservative Party lawmakers yesterday.
Finance Minister Jim Flaherty said today he was encouraged by the full-time job growth in today’s report and he predicts “modest” economic growth. “In the border context we are managing relatively well in the world,” Flaherty said in an interview with Business News Network from the Group of Seven meeting in France.
Full-time employment rose by 25,700 in August, and part-time jobs fell 31,200, the report said.
The U.S., which buys three-quarters of Canada’s exports, reported no increase in employment last month. Charles Evans, president of the Federal Reserve Bank of Chicago, said Sept. 7 the Fed should move “aggressively” to reduce unemployment, even at the cost of temporarily pushing inflation higher.
Signs of Deleveraging
“We are feeling the effects of a recovery and slow employment growth in the United States,” Tim Hockey, Toronto-Dominion Bank group head of Canadian banking, said today at a conference in London. “Additionally, personal loan growth has slowed down in Canada, as we are seeing some early signs of consumer deleveraging.”
Canadian average hourly wages rose 1.4 percent in August from a year earlier, repeating the July pace that was the slowest June 2003.
The number of self-employed workers fell by 6,900, and those working at corporations rose by 1,400.
“These weaker-than-expected results will feed into fears that the Canadian economy will not rebound as sharply from its second-quarter dip as policy makers would like to see,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, wrote in a note to clients.