Canada job losses stun market
By Louise Egan
OTTAWA (Reuters) - Canadian job losses in December were the heaviest since May 2003 as the softening U.S. economy and strong currency battered manufacturers, making an interest rate cut by the Bank of Canada later this month almost a certainty.
Statistics Canada reported that payrolls fell by 18,700, beating even the most pessimistic forecasts. But the unemployment rate remained unchanged at 5.9 percent and annual wage inflation, closely watched by the Bank of Canada when setting monetary policy, sped up to 4.9 percent from 4.1 percent in November.
"A very disappointing number, just shocking expectations to the downside with an outright job loss," said Eric Lascelles, chief economics and rates strategist at TD Securities.
"I think the Bank of Canada is already prepped for rate cuts and I think it validates that position. I don't think we're at the point where a 50 basis point rate cut is at all justified in Canada but the 25s are good to go," he said.
The Bank of Canada sets its overnight lending rate on January 22 and is widely expected to lower it to 4.00 percent from 4.25 percent, following a quarter-point cut in December.
The Canadian dollar sank to its lowest level in a month versus the U.S. dollar after the report to 98.02 U.S. cents, valuing each U.S. dollar at C$1.0202, down from 99.27 U.S. cents, or C$1.0074 at Thursday's close.
But as markets become increasingly jumpy over the prospects of a U.S. recession and its spillover effects on Canada, there were voices calling for calm.
"It's not time to push the panic button," said Garth Whyte, executive vice-president of the Canadian Federation of Independent Business. "This is not a trend yet." Continued...