July 8, 2016 / 12:37 PM / a year ago

UPDATE 2-Sluggish Canada jobs market stalls in June, fewer seek work

3 Min Read

(Adds analyst reaction, details, background)

By David Ljunggren

OTTAWA, July 8 (Reuters) - Canada's already-sluggish jobs market stalled in June, when the economy shed 700 positions, but the number of people seeking work also fell, and the unemployment rate edged down to an 11-month low of 6.8 percent.

Analysts polled by Reuters had forecast a gain of 5,000 positions, and expected the jobless rate to rise to 7.0 percent from 6.9 percent in May. The unemployment rate last hit 6.8 percent in July 2015.

The Statistics Canada data released on Friday underlined the challenges facing an economy trying to adjust to weak oil prices that have depressed demand and led to layoffs in the energy industry. The labor participation rate dropped to 65.5 percent, the lowest since December 1999.

Full-time positions dropped by 40,100 while part-time jobs rose by 39,400. The construction and manufacturing sectors lost 28,700 and 12,900 jobs respectively while accommodation and food services grew by 20,200 positions.

"It feels like it's a fairly weak report befitting conditions in the wider economy ... full-time hiring was weak so that's something that stands out as an additional source of concern," said David Tulk, chief Canada macro strategist at TD Securities.

The Canadian dollar weakened slightly after the data was released. Separately, a report showed U.S. job growth surged in June as manufacturing employment increased.

In the 12 months to June, the number of people employed edged up by 107,600, or 0.6 percent, with the majority of gains in part-time work. The six-month average for employment growth was 7,300 jobs, down from 11,200 in May.

In Alberta, where wildfires had shut down some oil production facilities and forced the evacuation of Fort McMurray, Statscan estimated that 1,600 people lost their jobs.

The agency did not collect data for the Fort McMurray region, choosing instead to use substituted values taken from surrounding areas.

The Bank of Canada, citing the wildfire impact, said last month that growth was likely flat or slightly negative in the second quarter. It sees an outsized third-quarter recovery.

A Reuters poll released on Thursday said the bank would keep interest rates unchanged for at least another year.

Doug Porter, chief economist at BMO Capital Markets, said the June jobs report was unlikely to sway the Bank of Canada.

"The Bank will probably be more influenced by what we saw out of the United States ... (which) suggests that the U.S economy is still on track," he said in a telephone interview.

Additional reporting by Matt Scuffham and Allison Martell in Toronto; Editing by Bernadette Baum

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