Canada’s Unexpected Job Loss Underscores Outlook for Slow Economic Rebound
Reports of declines in Canada’s job market and exports underscore that the country’s economic recovery may be a slow one.
Employment fell by 2,800 in February, the third drop in five months and one that wasn’t anticipated by any of the 25 economists in a Bloomberg News survey. Some 37,900 people left the workforce in the month, the largest drop since January 2009. Statistics Canada also reported the merchandise trade surplus narrowed to C$2.10 billion ($2.11 billion) from a revised C$2.86 billion in December as exports fell by the most in 11 months.
Job growth has been slowing since the middle of last year after hiring gains led the economy out of a recession in 2009. Yesterday, the Bank of Canada kept its key interest rate at 1 percent in the longest pause since the 1950s and said there are some signs of improving domestic spending and diminished risks from the global financial crisis.
“It’s going to be a slow process, even though we see sentiment recovering a bit,” said Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal. “In terms of the domestic picture that the Bank of Canada referred to as being a little bit firmer, these reports could be a disappointment.”
Waiting for Developments
“The employment data I find most disappointing, it’s six months we’ve been waiting for more positive developments,” Jean said. Economists surveyed by Bloomberg News had forecast an increase of 15,000 jobs and a 7.6 percent unemployment rate.
The U.S. today reported its best six-month job streak since 2006, with a non-farm payrolls gain of 227,000 in February.
The Canadian dollar was little changed from yesterday at 99.01 cents per U.S. dollar at 3:37 p.m. in Toronto, erasing earlier losses after the U.S. figures were released. One Canadian dollar purchases $1.0100. Yields on two-year Canadian government bonds increased 1 basis point to 1.18 percent.
By industry, retailing and wholesaling led the job decline with a 37,400 decrease, followed by a 21,900 drop for transportation and warehousing, Statistics Canada said. Health care and social assistance fell 21,700 while public administration declined by 14,700.
Young workers, defined as those aged from 15 to 24, accounted for almost all of the lost jobs in February, with a decline of 26,800. Men older than 24 gained 25,800 jobs, while women in that age group lost 1,700, Statistics Canada said. Youth unemployment rose to 14.7 percent from 14.5 percent.
“All told, a disappointment,” said Avery Shenfeld, Chief Economist at Canadian Imperial Bank of Commerce in Toronto, “and one that will temper expectations after yesterday’s statement that the Bank of Canada is moving towards hiking rates sooner rather than later.”
Employment in finance, insurance real estate and leasing rose by 41,200 in February, recouping half the industry’s losses over the previous five months. Construction rose by 14,000 and natural resources gained 6,800, capping a 10.2 percent gain over the past year, the fastest of any industry.
Atco Ltd. said March 5 it won its largest-ever Canadian contract to build housing for a natural resources project, a 2,586-person lodge for BHP Billiton Ltd. (BHP)’s Jansen potash site in Saskatchewan.
‘Gradual Recovery Coming’
“There is a gradual recovery coming,” Terry Carr, head of Canadian fixed income at Manulife Asset Management Ltd. in Toronto, said in a telephone interview yesterday. He helps oversee about C$16 billion in Canadian fixed-income assets. “The Bank of Canada is ‘‘unlikely to do anything until the Fed shows its hand.’’
Federal Reserve policy makers said they expect to keep U.S. interest rates low through at least late 2014.
Canada’s central bank yesterday said that first-quarter growth may exceed its January forecast of a 1.8 percent annualized expansion due to temporary factors it didn’t specify. It has forecast growth of 2 percent for this year, with consumption being tempered by exports as the strong dollar hurts competitiveness.
‘‘While today’s jobs report is disappointing overall, nevertheless, I would point out there are some positive elements that I think shouldn’t be ignored,” Prime Minister Stephen Harper told reporters in Toronto today. “We’re seeing a trend of the number of full-time jobs continuing to increase,”
“There will be a lot of measures in the budget to create jobs and to get us on a long-term, sustainable track,” Harper said. The fiscal plan is due March 29.
Canada added 220,200 full-time jobs from January to September of last year and since then the total has declined by 40,700 to about 14.06 million.
Today’s trade report showed exports fell 2.3 percent to C$41.4 billion, as industrial goods fell 11.9 percent to C$9.26 billion and machinery and equipment declined by the same percentage to C$6.63 billion.
Imports (CATBTOTI) dropped 0.6 percent in January to C$39.3 billion. Industrial goods fell 3.8 percent to C$8.24 billion and energy declined 5.9 percent to C$4.20 billion.
The trade surplus was the third straight and marked the longest string since November 2008.
Today’s release is the last time the jobs report will be published at 7 a.m. in Ottawa. Beginning next month, Statistics Canada will release all indicators at 8:30 a.m.
To contact the reporter on this story: Greg Quinn in Ottawa at email@example.com