Canada’s unemployment rate unexpectedly rose from a five-year low last month on a drop in full-time work, taking it above the U.S. jobless measure for the first time since 2008.
Unemployment rose to 7.2 percent from 6.9 percent while a net 45,900 workers lost their jobs in December, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 14,100 job increase and an unchanged unemployment rate according to the median forecasts. U.S. joblessness fell to 6.7 percent from 7 percent.
The weaker labor market, tepid exports and sluggish business investment are hampering economic growth. Bank of Canada Governor Stephen Poloz said in an interview last month that a rotation of demand from indebted consumers is taking longer than he expected and predicted the economy won’t reach full output for two years. The Canadian dollar dropped to a four-year low and bond yields plunged.
“It’s going to make the Bank of Canada cautious in our view,” Paul Ferley, assistant chief economist at Royal Bank of Canada, one of three economists who correctly predicted higher unemployment today, said by phone from Toronto. “It just argues for them to keep policy accommodative but not to go so far as to introduce further easing.”
After today’s report, traders were pricing in about 11 basis points of lower rates by the Bank of Canada’s December 2014 policy meeting, compared with 6.2 basis points yesterday and 3.1 basis points a month ago, according to Bloomberg calculations based on overnight index swaps.
Canada’s dollar depreciated 0.5 percent to C$1.0892 per U.S. dollar at 5 p.m. in Toronto. It reached C$1.0946, the weakest since October 2009. Yields on benchmark two-year government debt dropped 8 basis points to 1.02 percent, the lowest since May.
The higher jobless rate is “a dubious distinction” and shows that “Canada underperformance of the trend in the U.S. is well under way,” said Derek Holt, Scotiabank’s vice-president of economics in Toronto.
Full-time employment declined by 60,000 workers in December, the most since October 2011, while part-time positions increased by 14,200.
The report caps a year of labor market weakness with 102,000 jobs created in 2013, a 0.6 percent increase that was the slowest since 2009, Statistics Canada said. Employment growth slowed from 1.8 percent in 2012.
“We sympathize with those Canadians who lost their job last month,” Finance Minister Jim Flaherty said in a statement. “It’s also important to remember that monthly job numbers are volatile and our overall trend is positive.”
The number of unemployed rose by 24,300 during the year, greater than the 19,200 annual increase in full-time work. For every full-time job created last year, four part-time jobs were added, the data show.
“Conservatives love to boast about their employment record but the facts simply don’t back them up,” said Peggy Nash, finance spokeswoman for the opposition New Democratic Party. “Job creation remains very weak and too many of the jobs being created are low-paying and part-time.”
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, said last month it will cut its workforce by 18 percent amid weaker-than-expected demand in emerging markets. Canada’s postal service said Dec. 11 it will cut its workforce by as many as 8,000 over five years, or almost 12 percent, to reduce costs.
Natural resource companies fired 8,000 workers in December, Statistics Canada said, and education employment dropped by 18,500.
Private companies cut 26,300 workers and public-sector employment rose by 18,200 in December.
Workers designated by Statistics Canada as employees fell by 8,000, and the self-employed category dropped by 37,900.
The jobless rate in Ontario, the most populous province, jumped to 7.9 percent from 7.2 percent as employment fell by 39,300, Statistics Canada said.
The labor force participation rate remained at 66.4 percent, the lowest in more than a decade, for a fourth month in December.
Average hourly wages of permanent employees rose 2 percent in December from a year earlier, slower than the prior reading of 2.3 percent.
The share of Canadians who say their jobs are secure declined to 45.9 percent on Jan. 3 from 48.9 percent on Dec. 6, according to the Bloomberg Nanos Canadian Confidence Index.
Statistics Canada publishes an unemployment rate that it says is comparable to the U.S. rate; on that basis, and unadjusted for seasonality, Canada’s unemployment was 5.8 percent in December, which would still put it below the U.S. rate.
Canada’s economy may have enough momentum for the job market to rebound next month, said Ferley at Royal Bank, citing recent swings from job losses to gains. Canada added 59,200 jobs in August following a July decline of 39,400, for example.
“The story changes if the weakness persists one or two months out,” he said.