OTTAWA (Reuters) - Canada’s economy lost more jobs than expected in February and posted a record trade deficit in January, reports showed on Friday, as evidence mounted that the recession may be more severe than many had previously thought.
Statistics Canada said net job losses totaled 82,600 last month, compared with forecasts for a decline of 52,500. That brought total job losses in the past four months to 295,000.
The unemployment rate climbed to 7.7 percent, the highest level since September 2003.
“A U.S.-style pace of labor market deterioration has landed on Canada’s doorstep,” said Derek Holt, economist at Scotia Capital.
Adjusting for their relative size, the Canadian economy is bleeding jobs faster than the U.S. economy, which shed 651,000 jobs in February.
The bleak data added to news last month that job losses in January were the steepest on record at 129,000, sending shock waves through the country and nudging politicians to push a fiscal stimulus package through Parliament.
Expect more job destruction ahead, analysts warned, as the global financial crisis batters Canada’s export-reliant economy and has already triggered big layoffs in the auto industry and other manufacturing sectors, as well as in forestry companies.
“If, in fact, the Canadian economy is going to lose half a million jobs this year it seems that we’re almost halfway there two months into the year,” said Paul Moist, president of the Canadian Union of Public Employees.
Finance Minister Jim Flaherty, speaking to CFRB radio, said “we’re going to see continuing deterioration for several months at least.”
The Canadian dollar weakened immediately after the report but later rebounded. At 11:40 a.m. EDT the currency was at C$1.2730 to the U.S. dollar, or 78.55 U.S. cents, against C$1.2786 to the U.S. dollar, or 78.21 U.S. cents, just before the numbers.
A separate report on merchandise trade in January showed that shrinking U.S. demand for cars led to a dramatic slide in Canadian exports and a record trade deficit of $993 million.
Analysts had expected a $1 billion deficit, according to a median of forecasts.
Roughly a third of Canada’s gross domestic product is tied to international trade and three-quarters of its exports are sold to the United States. The trade surplus with the United States fell to a decade low $2.98 billion in January.
Economists have been scrambling lately to mark down their forecasts for the economy this year and Friday’s data suggests the Bank of Canada may do the same in April, when it next makes forecasts.
“They (the Bank of Canada) might go more bearish near term,” Holt said.
The central bank, which has slashed its key interest rate to a historic low of 0.5 percent, said in January that it expects the economy to start growing again in the third quarter. Its forecast of 3.8 percent growth in 2010 is seen as too upbeat by most private sector economists.
The bank may drop rates to 0.25 in April but may also need to resort to printing money to buy securities and thereby lower interest rates in the market -- a step known as quantitative easing.
“It remains likely that the Bank of Canada will become even more comfortable with pursuing quantitative easing,” said Millan Mulraine of TD Securities.
Additional reporting by Scott Anderson and Jennifer Kwan; Editing by Peter Galloway