OTTAWA (Reuters) - The Canadian job market lost a surprise 71,200 net positions in November while the unemployment rate rose to 5.9%, the highest in more than a year, data showed on Friday, as analysts said a repeat of the weak numbers could force the Bank of Canada to rethink its monetary policy.
Analysts in a Reuters poll had forecast a gain of 10,000 jobs and had predicted the unemployment rate would hold steady at 5.5%. Wages for permanent employees jumped by 4.4%, matching the gain seen in October, Statistics Canada said.
“All around miss,” said Derek Holt, vice president of Capital Markets Economics at Scotiabank. He noted November’s numbers followed a weak report in October, when the labor market unexpectedly shed jobs despite a likely boost from hiring related to the federal election.
“At the margin it is convincing evidence that we may be at a weakening spot in the labor market,” he said.
The Canadian dollar tumbled to 1.3244 to the U.S. dollar, or 75.51 cents U.S, after the jobs report.
November’s unemployment rate was the highest seen since the 6.0% reported in August 2018, while Statscan said 38,400 full-time jobs and 32,800 part-time jobs were lost in November.
Canada’s goods-producing industries saw a decline of 26,600 net jobs, largely on manufacturing. The services sector lost 44,400 net jobs.
The Bank of Canada on Wednesday held its overnight interest rate steady, which it has done since October 2018 even as several of its counterparts have eased. Future moves, it said, would depend on its assessment of the damage done by trade conflicts against sources of economic resiliency.
On Thursday, Bank of Canada Deputy Governor Timothy Lane said Canada’s strong labor market, particularly in the service sector, has been underpinning the economy, and data was suggesting the jobs market was tightening.
A repeat of November’s weak jobs report could force the central bank to reconsider, analysts said on Friday.
“Even a pretty ugly report probably won’t be enough to really convince them that labor market trends have changed significantly,” said RBC Senior Economist Nathan Janzen, given recent labor market strength.
“But if we saw a repeat of this labor market performance going forward, I think (the Bank of Canada) would start rethinking their strategy.”
Chances of a Bank of Canada interest rate cut by July rose to 50% from about 40% before the jobs data, the overnight index swaps market indicated.
The manufacturing sector lost 27,500 jobs in November, while there were 24,900 fewer public administration jobs, Statistics Canada said. Many of the losses in public administration, analysts said, followed the end of October’s national election.
Reporting by Kelsey Johnson, editing by Dale Smith, Angus MacSwan and Dan Grebler