OTTAWA (Reuters) - Canada’s unemployment rate fell to 7.2 percent in July, its lowest since December 2008, from 7.4 percent in June, though this was due more to people dropping out of the labor market than to job creation.
Statistics Canada said on Friday the economy managed to eke out 7,100 new jobs while holding on to the 28,400 jobs that were picked up in June.
The increase was less than half that expected in a Reuters survey of analysts but was marked by a healthy switch to full-time and private-sector employment.
“Looking beyond the so-so headline, almost every detail in the report is quite strong. We saw solid full-time gains, the private sector accounted for all the job gains and surprisingly the unemployment rate fell,” BMO Capital Markets deputy chief economist Douglas Porter said.
“Overall, I would actually characterize this as good news, even though the headline employment number was a bit below consensus. I think the details are unambiguously better than the headline would suggest.”
The median forecast in a Reuters survey of analysts was for 15,000 new jobs and a 7.4 percent unemployment rate. July saw 25,500 new full-time positions while 18,400 part-time ones were lost.
The Canadian dollar briefly rose as high as C$0.9801 to the U.S. dollar, or $1.0203, immediately after the data. But it resumed its weakening trend as global equity markets and many commodity prices tumbled for a second day.
The currency had closed at C$0.9795 versus the U.S. dollar, or $1.0209, on Thursday.
Key to the unemployment rate decline was that 28,600 people dropped out of the labor force.
The jobless rate had peaked at 8.7 percent in August 2009 and now stands approximately two percentage points lower than that in the United States.
Despite the strong Canadian dollar, employment in manufacturing edged up by 10,100 and stood 22,000 higher than the depressed levels of a year earlier. Construction, transportation, warehousing and retail and wholesale all posted gains in the month; health and education registered losses.
The annual increase in hourly average wages of permanent employees, closely watched by the Bank of Canada for signs of inflationary pressure, fell to 1.2 percent in July from 2.0 percent in June.
The numbers, which provide the first glimpse into Canada’s third quarter, are closely watched by the central bank. The Bank of Canada hiked interest rates three times last year, but paused in September due to global economic uncertainty.
The central bank was widely expected to resume its rate hike campaign this year. But the financial market turmoil of recent days has clouded the outlook.
Overnight index swaps, which trade based on expectations for the bank’s key policy rate, show traders are now pricing in the prospect of rate cuts later this year.
Analysts said the near-term movement in markets may have a bigger influence on what the Bank of Canada does next than the most recent jobs data.
“Unfortunately, things have changed a lot in recent times so the market reaction (to the data) is very muted. At least before this recent bout hit you could say things were in decent shape,” said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
“The Bank of Canada is doing what we’re all doing -- watching equity markets. They’re firmly going to do nothing at the moment and wait to see how this develops.”
Additional reporting by Euan Rocha, Claire Sibonney and Ka Yan Ng in Toronto; Additional writing by Jeffrey Hodgson; Editing by James Dalgleish