August 8, 2014 / 12:52 PM / 5 years ago

Canada's job growth stalls; labor participation at 13-year low

OTTAWA (Reuters) - Canada’s economy created a net 200 jobs in July, far fewer than analysts had expected, while labor force participation fell to a fresh 13-year low, the country’s statistical agency reported on Friday.

Motorized mannequins hold signs that read "Hire Me" in Toronto May 23, 2014. REUTERS/Mark Blinch

The data confirmed the general sluggishness that has marked Canada’s labor market in recent quarters and reinforced expectations the Bank of Canada is unlikely to raise interest rates any time soon.

Part-time employment rose by 60,000 jobs last month, while full-time jobs fell by 59,700, according to Statistics Canada. Analysts had forecast a net gain of 20,000 jobs after the loss of 9,400 positions in June.

“It highlights a very disappointing pace of job gains in Canada,” said Camilla Sutton, Scotiabank’s chief currency strategist, who described the drop in full-time employment as “shocking.”

Canada’s unemployment rate dipped to 7.0 percent from 7.1 percent because fewer people were looking for work. The labor force participation rate fell to 65.9 percent, the lowest level since October 2001.

The year-over-year employment gain was only 115,300 jobs, or 0.7 percent, while the six-month moving average for employment growth dropped to 3,900 from 8,800 in June.

The Canadian dollar CAD=D4 hit a session low of C$1.0965 to the U.S. dollar, or U.S. 91.20 cents, shortly after the release of the data, down from Thursday’s close of C$1.0921, or 91.57 U.S. cents.

Analysts said the data provided breathing room for the Bank of Canada, which pays close attention to the labor participation rate and has said it will not consider a rate hike until it sees lasting signs of an economic recovery and pick-up in employment.

Canada’s central bank has kept its key interest rate at a near-record low of 1.0 percent since September 2010.

“I think this keeps the Bank of Canada on the sidelines for now, even though (economic) growth is looking quite a bit stronger in the second quarter,” said Robert Kavcic, senior economist at Bank of Montreal.

“There is really no job growth anywhere outside of Alberta right now.”

The number of people working in construction dropped by 42,200 in July and employment in health care and social assistance was down by 28,500, Statscan reported.

Those losses were partly offset by 11,500 additional jobs in manufacturing and 32,100 more positions in educational services.

Finance Minister Joe Oliver said the monthly numbers were “really volatile” and stressed what he said was Ottawa’s good job creation record.

“As we’ve said many times, the international financial situation is fragile and we are intent on keeping the fiscal strength necessary to sustain the growth that we have,” he told reporters in Toronto.

BMO Financial Group said on Friday it had carried out a survey on hiring intentions that showed 55 percent of businesses with at least 50 employees planned to expand the size of their workforces this year.

Only 24 percent of businesses with fewer than 10 employees had plans to hire more workers, it added.

Additional reporting by Leah Schnurr, Allison Martell, Euan Rocha and Alastair Sharp in Toronto; Editing by Meredith Mazzilli and Paul Simao

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