OTTAWA (Reuters) - A surprisingly large 55,000 jobs were lost in Canada in July, the biggest monthly job loss since the 1991 recession.
The Canadian dollar dropped immediately and bonds rose in reaction to release of the Statistics Canada employment report on Friday morning. Economists called the figures “extremely ugly” and “stunningly bad.”
Most of the losses, 48,000, were in part-time work and overall employment remained 227,000 higher than it was a year earlier. The jobless rate dropped to 6.1 percent from 6.2 percent as youth and some older people left the work force.
“There is no question the economy is slowing,” said BMO Capital Markets senior economist Michael Gregory.
But he said: “We’re nowhere near the 1991 recession... The numbers are so extreme that it leads you to believe that maybe there’s some statistical anomalies going on here.”
The median estimate by analysts surveyed by Reuters had been for a gain of 5,000 jobs in July following a loss of that magnitude in June.
More than half of the jobs lost, 32,000, were in the factory sector. The province Ontario, Canada’s industrial powerhouse, shed 41,000 factory jobs. Manufacturers have been hit hard by the impact of the strong Canadian dollar.
In neighboring Quebec, also heavily industrialized, the unemployment rate rose to 7.4 percent from 7.2 percent.
“I would suggest there is some statistical noise going on here. We had a big boost in manufacturing in May that seemed more fiction than reality, and I think this is that boomlet working its way out of the economy,” HSBC Canada market strategist Stewart Hall said.
Statistics Canada does not revise its employment data, so if a survey erroneously captures a jump in jobs, the error may show up as a fall in a later report.
Even combining a few months, however, a pretty picture does not emerge. Statscan has reported a loss of 52,000 jobs from May through July, and 33,000 from April through July.
Canada is being hit by global economic factors beyond the control of any one government, Finance Minister Jim Flaherty said in a statement.
“However, Canada’s economic fundamentals remain solid. Canada’s labor market has outperformed that of the U.S. since the start of the year, while over 70,000 jobs have been created in Canada, the U.S. has lost over 463,000.”
Economists said the figures could give the Bank of Canada pause, perhaps increasing the odds of an interest rate cut as the bank gauges the effects of lower growth on inflation.
“Up to now recent comments have been sort of highlighting the risk to inflation but with this kind of employment report it’s going to make clear that there is risk on the growth side as well,” Royal Bank of Canada assistant chief economist Paul Ferley said.
Inflation spiked to 3.1 percent in June, outside the central bank’s target range of 1 to 3 percent and well above its target of 2 percent.
“The trouble for the Bank of Canada is that inflation remains too high and will reescalate if, as we expect, energy prices rebound,” CIBC World Markets senior economist Avery Shenfeld remarked.
Canadian Labor Congress President Ken Georgetti called the losses a catastrophe, adding: “The Bank of Canada must focus on jobs and families before apparent signs of future inflation.”
Canadian manufacturers and exporters had some relief this month from the decline in the Canadian dollar from near parity with the U.S. dollar.
The Conference Board of Canada’s consumer confidence index also inched up in July after two large declines in the preceding months. However, it found twice as many Canadians believe there will be fewer jobs in their communities in six months than those who believe there will be more.
The Canadian currency fell to 93.72 U.S. cents, or C$1.0670 to the U.S. dollar, from 94.16 U.S. cents, or C$1.0620 to the U.S. dollar, immediately prior to the jobs numbers.
The two-year bond rose 10 Canadian cents to C$101.80 to yield 2.717 percent. The 10-year bond climbed 19 Canadian cents to C$105.16 to yield 3.619 percent. Canadian stocks also fell on the employment data and lower oil and gold prices.
Additional reporting by Frank Pingue; Editing by Peter Galloway