WRAPUP 2-Gloomy Canada jobs report shows economy still not at full speed

Fri Sep 5, 2014 10:56am EDT
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(Adds comment from analyst, union, dollar reaction)

By David Ljunggren and Randall Palmer

OTTAWA, Sept 5 (Reuters) - The Canadian economy unexpectedly lost 11,000 jobs in August from July, and the number of private-sector employees fell sharply in another sign that the economy is still struggling to regain full speed.

Statistics Canada said on Friday that the unemployment rate had remained at 7.0 percent. Analysts had forecast that 10,000 positions would be added after the gain of 41,700 jobs in July.

The figures provide more evidence that there is still plenty of slack in the economy. The Bank of Canada says it will not raise interest rates from near-record lows until it sees signs of a sustained recovery.

"The overriding picture here is that the Canadian economy is struggling to meaningfully produce new jobs," said Doug Porter, chief economist at BMO Capital Markets.

The 12-month gain was just 81,300 jobs, or 0.5 percent, while the six-month moving average for employment growth dropped to 10,200 from 10,900 in July.

The Canadian dollar initially dropped to C$1.0885 to the greenback, or 91.87 U.S. cents, weaker than Thursday's close of C$1.0874, or 91.96 U.S. cents, but later regained all the lost ground.

The central bank has kept its key interest rate steady at 1 percent since September 2010, and most market operators do not expect a hike until late next year.   Continued...