OTTAWA (Reuters) - Canada continued to post heftier than expected job losses in March as the economy spiraled downward, hardening expectations of more action from the Bank of Canada to stimulate lending.
The unemployment rate jumped to a seven-year high of 8 percent last month and the economy lost 61,300 more jobs, resulting in the sharpest five-month employment decline since the 1982 recession, Statistics Canada said on Thursday.
Statscan also reported a small trade surplus in February after two months of deficit and a 0.7 percent decline in new housing prices that same month.
Amid expectations that the economy contracted at the fastest pace on record in the first quarter, market reaction to the job numbers was muted.
“There were very few surprises here and this is about exactly what you would expect given the economic backdrop and the kind of losses we saw in the U.S,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The Canadian dollar initially firmed against the U.S. currency to C$1.2345, or 81 U.S. cents, from C$1.2365 to the U.S. dollar, or 80.87 U.S. cents, ahead of the data. Analysts said the report forced some players expecting even bigger job losses to cover bets that the Canadian dollar would weaken.
On average, economists had forecast 55,000 jobs would be lost, though some estimates had been for as much as 90,000.
Prime Minister Stephen Harper said the job figures were “not good news” but repeated his assertion that when the crisis was over, Canada would face a shortage of skilled workers.
The data did little to change the market view that Bank of Canada Governor Mark Carney will eventually make a foray into nonconventional policies to stimulate the economy as he runs out of room to cut interest rates.
“The issue is now whether they will respond with interest rates or move to some sort of credit easing, but certainly they will be looking for ways to add further liquidity to the system,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.
The central bank meets on April 21 to discuss policy but its key overnight rate, already at 0.5 percent, may have reached its floor. Carney has promised to unveil in an April 23 report a suite of other tools the bank can use to combat the recession but he has cautioned investors that he will not necessarily make any moves on that front right away.
Analysts say the bank’s options include effectively printing money to buy assets in the open market in order to bring down longer-term interest rates, a policy called quantitative easing.
In the February trade figures, a rebound in exports by the battered auto industry helped Canada post a surplus of C$126 million ($102 million) after sliding into the biggest trade deficit on record in January.
But analysts warned against declaring a comeback in the trade picture as long as the U.S. market, which buys about 75 percent of Canadian exports, remains anemic.
Exports surged 5.2 percent in February to C$33 billion and grew 7 percent in volume terms. Imports expanded by 1.1 percent to C$32.95 billion.
After plummeting to a 17-year low in the first month of this year, automotive products exports leaped 20 percent in February as some plants resumed production. Auto exports were still sharply below year-ago levels.
The housing market continued to weaken in February. New housing prices were down 1.8 percent from a year earlier, the largest year-on-year decrease since 1996.
The housing downturn has hit building starts, prices and sales but has been slower and less dramatic than the U.S. housing slump.
Additional reporting by Frank Pingue and Scott Anderson in Toronto and David Ljunggren in Ottawa; editing by Rob Wilson