September 5, 2008 / 11:23 AM / in 9 years

Job market rebounds ahead of election call

OTTAWA (Reuters) - Canada’s job market rebounded slightly in August from heavy job losses in July, easing fears of a sharper than expected economic downturn on the eve of a federal election campaign to be announced this weekend.

Employers resumed hiring last month, adding 15,200 to the payrolls on a full-time basis, mainly in the private sector, Statistics Canada said on Friday.

The gains came after 55,000 jobs evaporated in July, the biggest monthly loss since the 1991 recession. The report also showed less pressure on inflation from wage gains.

The unemployment rate in August remained unchanged at 6.1 percent.

The numbers are likely to be welcome news for the Bank of Canada, allowing it to stand pat on interest rates for some time and for Prime Minister Stephen Harper as he rallies his Conservative Party for an election campaign that is set to officially begin on Sunday for an October 14 vote.

Finance Minister Jim Flaherty, already in full campaign mode, credited Harper’s leadership for fostering the job gains.

“Generally it was a little bit better than expected almost across the board and it takes away some of the sting from the very weak July report,” said Doug Porter, deputy chief economist at BMO Capital Markets

Still, there was no denying that the job market is softening, as employment gains so far this year are less than half those of the same period in 2007 and there was a net loss of 45,000 jobs in the three months to August.

“It was a pretty sluggish summer overall, but if there is some encouraging signs here it’s that the unemployment rate really isn’t marching higher,” said Porter.

The report helped push the Canadian dollar higher to C$1.0635 to the U.S. dollar, or 94.03 U.S. cents, from pre-data level around C$1.0656 to the U.S. dollar, or 93.84 U.S. cents.

Analysts had expected, on average, that the economy created a net 8,000 jobs last month but forecast the jobless rate would tick higher to 6.2 percent.


The health of the jobs market is a crucial piece of data feeding into the Bank of Canada’s outlook on growth and inflation, and could weigh heavily in its next interest rate decision.

After holding its overnight rate at 3 percent on Wednesday, the central bank said that level was “appropriately accommodative,” suggesting it would need to see considerably more weakness in the economy before easing further.

“I think it reinforces the Bank of Canada’s optimism about the domestic economy, but I think though they are still looking at risks from the U.S. So, bottom line, it keeps them on the sidelines,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

Leading up to the federal election, jobs have become a politically explosive issue as the opposition parties blame the Conservative government for ignoring heavy factory layoffs caused by weaker U.S. demand, high energy costs and fierce competition from Asia.

Some 67,000 manufacturing jobs have been lost in the year through August, although the sector added jobs in the month.

But Flaherty cites strong labor market and income gains as factors that will help see Canada through the tough times.

“Our labor market continues to outperform that of the U.S. -- while more than 85,000 jobs have been created in Canada since the start of the year, the U.S. has lost more than 600,000,” he said in comments e-mailed to reporters.

“Nevertheless, global economic factors and a widespread slowdown continue to have an impact on Canada,” he cautioned.

The U.S. jobless rate jumped to a five-year high of 6.1 percent in August as an unexpectedly steep 84,000 jobs were lost in the month.

In a sign that inflation pressures are abating, wage inflation continued to slow in August, with the average hourly wage of permanent employees rising 3.3 percent from a year earlier, down from 3.8 percent in July.

Additional reporting by Frank Pingue; editing by Rob Wilson

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