June 6 (Bloomberg) -- Canada’s unemployment rate unexpectedly rose last month, the first increase this year, as full-time employment declined for the second month in a row.
The jobless rate increased to 7 percent from 6.9 percent even as part-time work drove employment up by 25,800, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 25,000 job increase and 6.9 percent unemployment, according to the median forecasts.
Full-time employment dropped by 29,100 in May while part-time positions increased by 54,900, Statistics Canada said. That’s in line with the trend over the last 12 months where all the job gains have been in part-time work.
Slack has built up in the world’s 11th largest economy this year as a harsh winter slowed production in the first quarter. The Bank of Canada said two days ago the “ingredients” for a slow return to full strength include rising global demand and a lower Canadian dollar that will support exports.
“The news isn’t great in the detail,” said Nick Exarhos, an economist at CIBC World Markets in Toronto. “Full-time job gains remain elusive.”
Canada’s dollar weakened as much as 0.2 percent against the greenback after the report and was down 0.1 percent at C$1.0940 per U.S dollar at 10:13 a.m. in Toronto. Government bond yields declined, with debt due in 10 years dropping to 2.29 percent from 2.33 percent.
“Very poor composition to the Canadian jobs report, with a big drop in full-time jobs,” Blake Jespersen, managing director of foreign exchange in Toronto at the Bank of Montreal, said by e-mail. Jespersen predicts the Canadian currency will weaken to C$1.13 by year-end, as the U.S. economy “catches fire” in the second half of this year.
Canada’s job gain showed less strength than today’s U.S. report of a 217,000 increase that took payrolls past their pre-recession peak, meaning it’s a “net negative” for the Canadian dollar, he said.
Canada’s labor force grew by 40,900 people in May, keeping the participation rate at 66.1 percent, the lowest since November 2001. The indicator peaked at 67.8 percent in 2008 before the last recession.
Workers designated by Statistics Canada as employees rose by 66,200 in May, and the self-employed category decreased by 40,400. Private companies added 24,700 workers, and public-sector employment rose by 41,500 people last month.
Service-industry employment rose by 35,100 in May while jobs in goods production fell by 9,500, today’s report showed. Education rose by 21,500 and accommodation and food service work gained 19,500, Statistics Canada said. Natural resources companies trimmed their payrolls by 23,200 and manufacturing employment fell by 12,200.
Microsoft Corp. said May 1 it plans to open a Vancouver training and development center with 400 employees, more than doubling its workforce in the city.
Average hourly wages of permanent employees rose 1.6 percent in May from a year earlier, matching the April pace. Those gains are in line with the Bank of Canada’s June 4 comment that inflation pressures remain subdued. Policy makers that day kept their key interest rate at 1 percent where it’s been since September 2010 and said the direction of the next move is unclear.
‘Luxury of Patience’
“The modest job gains year-to-date, just 12,400, even after today’s number, and the lack of significant wage pressures affords the Bank of Canada the luxury of patience,” said Mark Chandler, head of fixed-income research at Royal Bank of Canada’s RBC Capital Markets unit in Toronto.
Alberta, home to some of the world’s largest crude oil reserves, had a 16,400 employment gain in May. Over the last 12 months the western province’s gain of 71,200 jobs has represents 80 percent of the increase nationwide.
Outside of Alberta’s resource bounty, other parts of the report showed the economy shifting away from goods to services over the last year. Construction employment dropped by 39,500, or 2.9 percent, and health care and social assistance rose by 63,800 or 2.9 percent.
In a separate report, Statistics Canada said labor productivity declined for the first time in more than a year in the first quarter, falling 0.1 percent after a 1.0 percent gain in the previous three months.
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