September 5, 2014 / 1:33 PM / in 3 years

WRAPUP 1-Gloomy Canada jobs report shows economy still not at full speed

OTTAWA, Sept 5 (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.

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 a measly 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.

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.

"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.

"Until they start seeing indications of it, I think it will be a factor that will weigh in favor of them remaining on the sidelines," he said.

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.

July's jobs data was marred by a high-profile error caused by a botched update to a computer processing program, which meant Statscan initially said just 200 jobs had been created.

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

Market analysts had expected productivity to rise by 1.6 percent. Statistics Canada said the number of hours declined, also contributing to productivity growth.

Editing by Lisa Von Ahn

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