Canada surprises with big job losses in July

Fri Aug 10, 2012 11:06am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's economy unexpectedly lost 30,400 jobs in July in a third disappointing month for the labor market, indicating tepid growth that will likely keep the central bank on the sidelines for longer.

The dismal performance contrasts with new signs of strength in U.S. hiring and was worse than even the most bearish forecast in a Reuters survey. An average of 5,000 people lost their jobs in each of the last three months, according to the Statistics Canada data on Friday.

"It seems as if the global headwinds have caught up to the Canadian economy," said David Tulk, chief macro strategist at TD Securities.

The jobless rate climbed to 7.3 percent from 7.2 percent, with layoffs across a range of industries. The biggest job losses were in wholesale and retail trade and in professional, scientific and technical services.

The report bolsters suspicions that economic growth will stay below 2 percent, annualized, not fast enough to make Bank of Canada Governor Mark Carney hike interest rates.

Carney has been talking about tightening monetary policy since April and he sounded hawkish as recently as Wednesday. But he said he needs to see growth above "trend", estimated at about 2 percent, for rates to rise.

The Canadian economy, which survived the recession better than most of its trading partners, grew 1.9 percent in the first quarter and looks on track for a similar performance in the second.

"I don't think the market ever fully believed in the Bank of Canada's fairly hawkish tone, but it certainly dampens expectations for rate hikes in Canada," said Camilla Sutton, chief currency strategist at Scotiabank.   Continued...