Job growth slows, rate cut expected

Fri Jun 6, 2008 12:08pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian job growth slowed in May to its weakest since December on a sharp drop in full-time employment, a sign of a cooling economy that may spur the Bank of Canada to cut interest rates again this month.

Statistics Canada reported on Friday the economy added 8,400 jobs in the month as employers hired 40,600 part-time workers and dropped 32,200 full-time staff -- the biggest loss of full-time jobs since June 2006.

The unemployment rate stayed unchanged at 6.1 percent.

The performance was slightly below the median forecast in a Reuters poll for 10,000 jobs and followed four months of stronger than expected gains. In December 2007, the economy shed 18,700 workers.

Economists were not surprised by the softening labor market but said the details of the report, including a rise in manufacturing jobs and strong wage growth, revealed pockets of strength.

"It has a bit of an 'Alice in Wonderland' feel to it. Beyond the headline job numbers and the unemployment rate staying steady, almost every other aspect of the report was surprising," said Doug Porter, deputy chief economist at BMO Capital Markets.

Eric Lascelles, chief economist and rates strategist at TD Securities, called the report a "head spinner," full of contradictory signs, but said the bottom line pointed to at least one more quarter-point cut in the Bank of Canada's lending rate.

"In the end, I think the implications for the Bank of Canada are largely as the headline suggests, which is the labor market is softening. You can justify a 25 basis point cut off of this," he said.   Continued...