Canada Jobless Rate Reaches Lowest Since 2008 on DropoutsGreg Quinn
Canada’s jobless rate unexpectedly fell to the lowest in almost five years in September as young people dropped out of the labor market, helping pull the participation rate to the lowest in more than a decade.
Unemployment declined to 6.9 percent, the lowest since December 2008, from 7.1 percent in August, Statistics Canada said today in Ottawa. Job creation slowed to 11,900 in September from 59,200 in August as 21,400 workers ages 15 to 24 left the labor force. Economists surveyed by Bloomberg News projected a 10,000 job increase and an unchanged jobless rate, according to median forecasts.
“It’s nice to see at least moderate job creation, but the pace has cooled,” David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, said. “I don’t expect a burst of job creation like we saw late last year. It’s disappointing at this stage of the economy to see such weak labor force growth.”
Slowing job creation and signs of discouraged workers come a week after the Bank of Canada cut its economic growth forecast for the rest of the year with Senior Deputy Governor Tiff Macklem citing an “elusive” pickup in exports and investment. Employment growth has slowed after domestic spending and employment gains pulled Canada out of a recession triggered by the 2008 global financial crisis.
The unemployment rate declined “as fewer youths searched for work,” Statistics Canada said in its report today.
Canada’s dollar strengthened 0.1 percent to C$1.0386 versus its U.S. counterpart at 12:03 p.m. in Toronto. One Canadian dollar buys 96.28 U.S. cents. Government benchmark two-year bond yields were unchanged at 1.20 percent.
The participation rate fell to 66.4 percent from 66.6 percent, reaching the lowest since February, 2002.
That development is “very disappointing,” Watt said in an e-mail. “I would have thought that more would have been getting drawn back into the labor force,” he said. “Instead the labor force is not keeping pace with the population.”
The jobs number confirm the “softening trend” in the domestic economy, said David Tulk, chief Canada macro strategist with TD Securities in Toronto. Today’s data probably won’t have major implications for the Bank of Canada, he said.
Full-time employment rose by 23,400 in September and part-time work fell by 11,500 positions. Private companies added 73,600 workers and public-sector employment fell by 16,300.
The report shows the “overall long-term trend in Canada remains positive,” Finance Minister Jim Flaherty said in an e-mailed statement. “Not only were more jobs created in September, but we saw solid gains in the private sector and in full-time employment.”
Finance, insurance real estate and leasing led the job gains by industry with an increase of 33,200 in September. Natural resources employment rose by 18,900.
Manufacturing employment fell by 26,000 and construction by 14,100, Statistics Canada said. Public administration positions fell by 17,400, and has dropped by 7.2 percent over the last seven months, according to the report. Flaherty’s last budget had a plan to shrink the federal workforce to help eliminate the country’s deficit.
Workers designated by Statistics Canada as employees rose by 57,300, and the self-employed category fell by 45,400.
Average hourly wages of permanent employees rose 1.83 percent in September from a year earlier, exceeding the prior reading of 1.55 percent.
The slow wage gains and “discouraged” young workers damp the strength suggested by the drop in the unemployment rate, said Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal.
“There is hardly a reason for the Bank of Canada to believe that the unemployment rate decline implies that labor market slack is improving,” he said.