OTTAWA (Reuters) - Canada lost more jobs in October than even the gloomiest analyst had predicted, dashing hopes for a quick economic rebound and suggesting a recovery in the labor market may have gotten off to a false start.
The economy unexpectedly lost 43,200 jobs in the month after two months of gains, pushing the jobless rate up to 8.6 percent from 8.4 percent, Statistics Canada said on Friday.
The numbers showed markets were way off base with their consensus forecast of a 10,000 employment gain in the month after net gains of about 30,000 in each of the previous two months. Even the most pessimistic forecast in a Reuters poll called for a loss of just 10,000 jobs.
“Certainly this is a sobering piece of news for a recovery that will increasingly rely on domestic demand as its boost,” said Grant Bishop, economist with Toronto-Dominion Bank.
“It does show that employment remains rocky in Canada. And the recovery is still in process. We do deem it to be sustainable, but there is some widespread restructuring ongoing in the Canadian economy,” he said.
The Canadian dollar weakened just after the report to C$1.0742, or 93.09 U.S. cents, from C$1.0680, or 93.63 U.S. cents before the report.
U.S. data on Friday was also bleak, showing employers cut a deeper-than-expected 190,000 jobs in October, driving the unemployment rate to 10.2 percent, the highest in 26-1/2 years.
The Canadian jobs report added to the mix of data suggesting the economy is taking two steps forward and one step back as it emerges from a deep recession, and is reliant on government stimulus given limited private sector expansion.
The jobs numbers are “more consistent with the kind of recovery we’ve been seeing, which is a slow crawl,” said Avery Shenfeld, chief economist with CIBC World Markets.
“When you put the last three months together, you now have slightly positive trend in net hiring that is more consistent with the modest pace that we’re seeing in output growth.”
Data out last month showed Canada’s gross domestic product shrank by 0.1 percent in August, casting doubt on whether the country climbed out of recession in the third quarter.
Finance Minister Jim Flaherty has characterized the economy as “stabilizing” rather than being in full-blown upturn. And the Bank of Canada made the same point last month, when it predicted the return to economic normalcy would be delayed by three months to the third quarter of 2011.
The data keeps the pressure off the central bank as it plots its exit strategy from record low interest rates of 0.25 percent, allowing it to comfortably stick to its conditional pledge to hold the benchmark rate at that level until the end of June 2010.
“It (the central bank) suggested it was cautious about the fragile state of the recovery and these numbers confirm it,” said Mark Chandler, fixed-income strategist at RBC Capital Markets.
The three-month trend in jobs is for modest gains of about 5,000 to 10,000 jobs, which is “very consistent with a very slow start to the recovery,” Chandler said.
CIBC’s Shenfeld said the additional slack in the job market is “one more chip on the side of the Bank of Canada waiting for a long time before raising interest rates.”
The retail and wholesale trade sector suffered the heaviest hemorrhaging in the month, followed by “other services” -- which ranges from car mechanics to hairdressers -- and natural resources. Manufacturing posted a relatively modest decline of 8,200 jobs although the sector has undergone the heaviest layoffs in the year to October, with a decline of 11 percent.
As flagged by Flaherty on Thursday, the construction sector showed signs of strength with gains of 11,200 jobs, thanks to a housing market that is leading the recovery.
Payrolls shrank across the public and private sector but all the losses were in part-time positions while the number of full-time jobs grew, as did self-employed workers.
Hourly wages of permanent employees, closely watched by the Bank of Canada for inflation trends, rose 2.9 percent in October compared with a year earlier.
Additional reporting by Ka Yan Ng and Euan Rocha in Toronto; Editing by Jeffrey Hodgson