Canada sheds jobs, rate hike seen even less likely

Fri Oct 8, 2010 9:04am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada's economy unexpectedly lost 6,600 jobs in September, a surprise development that further reduced already slim chances the Bank of Canada will raise rates again later this month.

Analysts had predicted a gain of 10,000 jobs in September. The unemployment rate edged down to 8.0 percent from 8.1 percent in August as fewer people participated in the labor force, Statistics Canada said on Friday.

The data followed a raft of figures showing the Canadian economy is slowing after a fast start to the year. It mirrored the employment trend in the United States, where non-farm payrolls fell an unexpectedly large 95,000.

"There's no doubt the job market has slowed and has slowed notably from its very strong pace earlier in the year," said Doug Porter, deputy chief economist at BMO Capital Markets.

"The market had basically priced the Bank of Canada out (of further rate hikes). This won't do anything to change that."

The Bank of Canada raised rates for the third time since June last month, but made clear it would carefully consider the patchy recovery before acting again.

Based on a Reuters calculation, the market is pricing in an 89.32 percent chance rates will remain on hold at the October 19 rate decision, compared with 88.97 percent just before the data.

The Canadian dollar touched a session low of C$1.0238 to the U.S. dollar, or 97.68 U.S. cents, from around C$1.0188, or 98.15 U.S. cents before the data. It later recovered.   Continued...

<p>People walk through a foggy scene on Bay Street in the financial district in Toronto in this February 18, 2009 file photo. REUTERS/Mark Blinch</p>