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Canada Set for Slowest Non-Recession Hiring in 12 Years

Canada today will probably report it added 20,000 jobs in August, economists say, a level that would keep it on track for the weakest annual payroll growth in a non-recession year since 2001.

Employment gains for the first seven months of the year were 42,000, down from 126,400 in the same period in 2012. That means the world’s 11th largest economy needs to add about 30,000 jobs a month for the rest of 2013 to avoid suffering the weakest annual gain since 2001 except for the recession years of 2008-2009.

The hiring slowdown threatens to hobble the consumer spending that has led economic growth since 2008 at a time when exports, business investment and government spending have waned. Canada, which regained jobs lost in the last recession faster than all other Group of Seven nations, is also losing its edge over the U.S. in terms of its jobless rate.

“Everybody has been saying Canada is OK as long as job growth remains strong,” said Derek Holt, vice president of economics for Scotiabank in Toronto. “The wheels seem to have fallen off in that sense, and that might position the housing and consumer markets to face a little bit greater risk.”

Wage gains have also slowed, giving consumers less money for new spending or to pay down near-record debts. Increases in average earnings of permanent employees slowed in July to a year-over-year pace of 1.35 percent, down from a post-recession high of 3.9 percent in July 2012.

Spending Restrained

“Consumer spending is being restrained at the moment with households trying to pay down debt,” said Paul Ferley, assistant chief economist at RBC Capital Markets in Toronto. “If the situation gets complicated further in terms of further slowing in wage gains thus limiting income growth, it’s an issue.”

Job gains have slowed this year amid layoffs at manufacturers such as Milwaukee-based A. O. Smith Corp., which said in April it’s closing a residential water heater plant in Fergus, Ontario, with 350 employees, and as governments fire workers as part of efforts to balance budgets.

Today’s report will show unemployment was unchanged at 7.2 percent in August, down from a peak of 8.7 percent in August 2009, according to the median estimate of economists surveyed by Bloomberg. The U.S. will report at the same time from Washington that unemployment was unchanged in August at 7.4 percent, according to a separate survey.

Canada’s unemployment was 2.2 percentage points lower than the U.S. rate in November 2010 as the country was hurt less by the global financial crisis, in part because Canada’s banks remained solvent and continued lending during the recession.

Employment in Canada grew by 1.8 percent in 2010, the year after the slump, more than double the 0.8 percent job growth in the U.S. That trend has begun to reverse. U.S. employment has risen 1 percent since December, compared with 0.2 percent in Canada. U.S. employment has risen 4.3 percent since the end of 2010, compared with 3.2 percent in Canada.

Canada’s relative underperformance is partly a matter of timing, Holt said. “Our hiring was brought forward to a much earlier point in the recovery than is evident in other cases like the U.S.”

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