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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.
Statscan said part-time jobs fell by 43,700 in September, overshadowing a gain of 37,100 full-time positions. Over the past year, part-time employment has increased by 4.6 percent, a faster pace than the 1.5 percent growth in full-time jobs.
Canadian Finance Minister Jim Flaherty said he was not surprised by the data and was encouraged by the growth in full-time jobs.
Eric Lascelles, chief Canada macro strategist at TD Securities, said the market could now assume that interest rates would be on hold for a while."
But Lascelles noted that the report wasn't quite as soft as it seemed on the surface, given the healthy gain in full-time jobs, the drop in the unemployment rate and wage growth.
The average hourly wage of full-time permanent employees, closely watched by the Bank of Canada for inflation pressures, rose 2.5 percent in September from a year earlier. The equivalent figure for August was 2.3 percent.
The report showed employment among 15- to 24-year-olds fell by 42,000. But analysts said investors needed to look past the negative headline.
"The story is mostly young Canadians going back to school. These Canadians aged 15-24 were working part-time so that's why you have part-time employment down ... that's the simple link," said Sebastien Lavoie, assistant chief economist, Laurentian Bank Securities.
"This report is not disastrous. Certainly it supports the growing market participants' view out there that the Bank of Canada will take a pause on October 19."
Additional reporting by Ka Yan Ng, Euan Rocha and Jeffrey Hodgson in Toronto