Canada Jobless Rate Rose for Third Month in December to 7.5%

Canada's Jobless Rate Rose for Third Month in December
Job seekers look for job postings at a Service Canada center in Toronto, Ontario. Photographer: Aaron Harris/Bloomberg

Canada’s unemployment rate rose for a third month in December, the longest advance in two years, as a gain in jobs trailed growth of the labor force.

The jobless rate increased to 7.5 percent from November’s 7.4 percent and the recent low of 7.1 percent in September, Statistics Canada said today in Ottawa. Employment rose by 17,500, the first gain in three months. Over the past six months, the number of jobs has grown by 7,400, compared with a gain of 191,800 in the first half of 2011.

The labor market may stay stalled in 2012 with unemployment averaging 7.4 percent, according to a Bloomberg News survey of economists taken last month. Prime Minister Stephen Harper said “the news isn’t all good” in today’s report, speaking to reporters in Edmonton, Alberta.

“Job growth has cooled,” said Doug Porter, deputy chief economist with BMO Capital Markets in Toronto, by telephone. “I wouldn’t at all be surprised if we are averaging 10,000 jobs a month, which won’t cut into the unemployment rate at all” over the next six months, he said.

The U.S. reported a 200,000 increase in payrolls for December, higher than the median economist forecast of 155,000, and the unemployment rate unexpectedly fell to 8.5 percent from 8.6 percent. Canada’s jobless rate has been below that of the U.S. since October 2008.

Bond Yields

Bond yields fell after the Canadian report. The yield on the two-year benchmark Canadian government bond declined 2 basis points to 0.94 percent at 2:47 p.m. Toronto time. The three-month overnight index swap rate, which measures what investors expect the central bank’s key policy rate will average over that period, was unchanged at 0.98 percent.

The Canadian dollar depreciated 0.7 percent to C$1.0267 per U.S. dollar. One Canadian dollar buys 97.40 U.S. cents.

Full-time jobs fell by 25,500 in December while part-time employment rose by 43,100, Statistics Canada said today. Self-employed workers increased by 31,100, while workers classified as employees fell by 13,600.

Private-sector employment increased by 3,800 and public-sector jobs fell by 17,300.

Employment in the federal government may be curbed by Finance Minister Jim Flaherty’s pledge to eliminate a budget deficit by the fiscal year starting April 2015, in part by cutting annual government operating expenses by at least C$4 billion ($3.9 billion).

Trimming Labor Costs

Some companies are also seeking to trim labor costs. Caterpillar Inc., the world’s largest maker of construction equipment, and Rio Tinto Group locked out workers at plants in Canada last weekend after labor talks broke down.

Cangene Corp. said today it’s firing about 120 workers, or 17 percent of its staff, because of reduced demand. The pharmaceutical company is based in Winnipeg, Manitoba.

“The jobless numbers continue to rise and this government is still sitting on its hands,” Claude Patry, a lawmaker with the opposition New Democratic Party, said in a statement.

Manufacturing employment rose by 30,400 in December, followed by a 16,100 gain for professional, scientific and technical service workers, Statistics Canada said.

Employment in finance, insurance real estate and leasing fell by 14,500 and construction jobs decreased by 12,800. In the second half of 2011, finance industry employment fell by 49,300 and construction employment was up by 4,800.

Economists surveyed by Bloomberg News had forecast an overall December job gain of 20,000 and a 7.4 percent jobless rate. The 17,500 gain in employment was smaller than the 23,600 monthly increase in the labor force.

‘Play It Safe’

“Canadian businesses continue to play it safe amid global risks,” said Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal in a note to clients. “We expect them to continue doing so for a while.”

Canada added 199,200 jobs last year, following a 2010 advance of 298,100 and a 2009 decline of 198,300. The unemployment rate of 7.5 percent for December compares with 7.6 percent at the end of 2010 and 8.5 percent at the end of 2009.

Average hourly earnings of permanent employees rose 2.4 percent in December from a year earlier. The Bank of Canada says that figure is a key indicator of inflation.

“We are quite exposed” to global weakness, said Mark Chandler, head of fixed income strategy at Royal Bank of Canada’s capital markets unit in Toronto, adding people shouldn’t expect an “extraordinary return in terms of jobs.”

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