Euro crisis blamed for Canada's hefty job losses

Fri Nov 4, 2011 12:51pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Louise Egan

OTTAWA (Reuters) - Unexpected job losses pushed Canada's unemployment rate higher in October as the European debt crisis and U.S. weakness buffeted the exporting nation's economy and weakened confidence.

The prospect of an eventual interest rate cut by the Bank of Canada looked more plausible after the economy lost 54,000 jobs in October, eroding most of the prior month's gains and pushing the unemployment rate up to 7.3 percent from 7.1 percent.

Other data also suggested markedly slower growth toward the end of the year, showing a third consecutive decline in building permits in September and a slower pace of purchasing activity in October.

"It looks like global economic fears and Europe's debt crisis are taking a toll on Canadian business confidence and hiring intentions," said Sal Guatieri, senior economist at BMO Capital Markets.

Breaking with a recent trend, Canada's job report was more downbeat than October's employment figures in the United States. Data on Friday showed U.S. employment rose less than expected in the month, but a drop in the jobless rate to a six-month low and upward revisions to previous months' gains pointed to some improvement.

Guatieri and other economists are now openly talking about the possibility the central bank will begin reversing some of the rate hikes implemented last year, if the European problems continue to lap up on Canadian shores.

"Clearly it will discourage the Bank of Canada from raising interest rates for quite some time. If economic conditions deteriorate, it's possible the bank would cut interest rates. For the moment, though, we expect steady policy."

Last month, the bank extended a year-long freeze on its benchmark interest rate, now at just 1 percent.   Continued...

<p>A man with a sign strapped to his back uses a megaphone to attract the attention of potential employers as he hands out resumes on Bay Street in the financial district in Toronto, March 5, 2009. REUTERS/Mark Blinch</p>