OTTAWA (Reuters) - Canada suffered its worst job losses in over three decades in January as the recession forced employers to cut a record 129,000 workers and pushed the unemployment rate to 7.2 percent from 6.6 percent in December.
The report by Statistics Canada showed the biggest monthly downturn in employment since the federal agency began using its current methodology in 1976. It also showed record job losses in the manufacturing sector.
“I can’t see one glimmer of hope in this report when we dig beneath the headlines,” said Derek Holt, economist at Scotia Capital.
“The optimists are just taking body blows all over the place here,” he said.
The Canadian dollar fell immediately after the report to C$1.2506 to the U.S. dollar, or 79.96 U.S. cents, from C$1.2415, or 80.55 U.S. cents, earlier.
The monthly drop in employment, far worse than expected, single-handedly wiped out the net job gain in 2008 of less than 100,000. Canada has shed 213,000 jobs since October.
Analysts in a Reuters poll had forecast a job loss of 40,000 and an unemployment rate of 6.8 percent.
The monthly decline was also bigger than any seen in the previous economic troughs of the 1980s and 1990s, Statscan said. That raised fears this recession will be deeper and more protracted than policy-makers have predicted and that the Bank of Canada will be compelled to cut rates further from their 50-year low of 1 percent.
“Everybody is prepared for a pretty weak first quarter, but these numbers are probably surprising the more bearish views,” said Craig Wright, chief economist at the Royal Bank of Canada.
Many economists disagree with the Bank of Canada’s projection that the economy will recover more quickly than in past recessions, with growth returning in the third quarter. Last month it projected the economy would shrink 4.8 percent in the first quarter after contracting 2.3 percent in the fourth quarter of last year.
Canada’s job numbers preceded a U.S. report showing the most severe job losses there in 34 years.
Sal Guatieri, senior economist at BMO Capital Markets, said Canada was in for more carnage in the labor market in coming months.
“This is the start of a wave of job losses that will likely extend through the first half of this year,” he said.
Canadian companies have been announcing massive layoffs on an almost daily basis. Montreal-based aircraft maker Bombardier was the latest, saying on Thursday it would cut more than 1,300 jobs due to a softening market for business jets.
The dramatic downturn in January affected full-time and part-time employees and was spread across the private and public sectors.
The last time the unemployment rate hit 7.2 percent was in November 2004.
Finance Minister Jim Flaherty had hinted on Thursday the report would be grim, saying the job numbers would be “very regrettable” and that there was a risk that Canada’s recession would get much worse.
Manufacturing, highly sensitive to U.S. demand, was the worst hit in January. The sector lost just over 100,000 jobs due largely to troubles in the auto sector.
The average hourly wage of permanent employees, however, rose in the month to 4.7 percent from 4.5 percent in December.
Additional reporting by Toronto Treasury Desk; Editing by Jeffrey Hodgson