September 5, 2014 / 12:42 PM / 4 years ago

Gloomy Canada jobs report shows economy still not at full speed

OTTAWA (Reuters) - The Canadian economy unexpectedly lost 11,000 jobs in August from July, and the number of private-sector employees fell sharply in another sign that the economy is still struggling to regain full speed.

A welder fabricates a piece of equipment at a company in Calgary, Alberta in a file photo. REUTERS/Todd Korol

Statistics Canada said on Friday that the unemployment rate had remained at 7.0 percent. Analysts had forecast that 10,000 positions would be added after the gain of 41,700 jobs in July.

The figures provide more evidence that there is still plenty of slack in the economy. The Bank of Canada says it will not raise interest rates from near-record lows until it sees signs of a sustained recovery.

“The overriding picture here is that the Canadian economy is struggling to meaningfully produce new jobs,” said Doug Porter, chief economist at BMO Capital Markets.

The 12-month gain was just 81,300 jobs, or 0.5 percent, while the six-month moving average for employment growth dropped to 10,200 from 10,900 in July.

The Canadian dollar initially dropped to C$1.0885 to the greenback, or 91.87 U.S. cents, weaker than Thursday’s close of C$1.0874, or 91.96 U.S. cents, but later regained all the lost ground.

The central bank has kept its key interest rate steady at 1 percent since September 2010, and most market operators do not expect a hike until late next year.

“From the Bank of Canada’s point of view, they’re probably going to want to see indications of greater strength in employment,” said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

Full-time jobs dropped by 2,300 from July, while part-time jobs decreased by 8,700. The labor participation rate, which is of particular interest to the Bank of Canada, slipped to 66.0 percent, the lowest since November 2001.

The fall of 111,800 in the number of private-sector employees amounted to 1.0 percent, equaling the record month-on-month drop in April 1982. Overall, 97,800 employees lost their jobs, while the number of self-employed rose by 86,900.

“When a large increase in self-employment coincides with a large drop in positions paid by an employer, it begs the question of whether Canadians are becoming self-employed by choice or because jobs are not available,” said Erin Weir, an economist for the United Steelworkers union.

Derek Holt of Scotiabank Economics said the figures looked “very fishy” and advised clients to treat them carefully.

July’s jobs release was marred by a high-profile error causing Statscan to say initially that just 200 jobs had been created.

Statscan also said labor productivity in the second quarter rose 1.8 percent from the first quarter as businesses boosted their output at a much faster pace.

Analysts had expected productivity to rise by 1.6 percent.

Separately, the pace of purchasing activity growth in Canada slowed in August, the Ivey Purchasing Managers Index showed.

Additional reporting by Leah Schnurr in Toronto; Editing by Lisa Von Ahn

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