OTTAWA (Reuters) - Canadian job losses likely began in earnest in November as the economy stagnated, following three straight months of surprisingly strong employment growth, analysts said on Thursday.
Employers are expected to have shed 25,000 workers in the month, according to the median forecast of analysts in a Reuters poll. They also forecast the unemployment rate would rise to 6.4 percent from 6.2 percent in October, the highest level since September 2006.
“Much of the job losses are likely to come from the ailing manufacturing sector, though we also expect to see some declines in service sector employment,” said Millan Mulraine, an economics strategist at TD Securities.
November would be only the third month in all of 2008 with job losses, with the others being June and July.
Canada’s economy grew at a robust 1.3 percent in the third quarter. But economists forecast that it slid into recession as of the fourth quarter and will continue to contract through at least the second quarter of next year. The slackening demand will lead to more layoffs during that period.
“In the coming months, we are likely to see further deterioration in labor market conditions as the Canadian economy softens in the face of a major U.S. and global economic recession,” said Mulraine.
In the three months preceding November, employers added an average of 44,000 people to their payrolls each month. Analysts had expected job losses in October, reflecting the deepening financial crisis, but hiring linked to the federal election managed to keep losses at bay for another month.
“The November report is expected to reflect most of these workers being laid off in the month, which will exacerbate an expected weakening trend in employment that is expected to send employment down an expected 45,000 in the month,” said Paul Ferley, assistant chief economist at RBC Economics Research who is at the pessimistic end of the forecast range.
The employment report will have little impact on the Bank of Canada’s interest rate decision next Tuesday. Markets expect the central bank to cut its benchmark overnight rate by 50 basis points to 1.75 percent, and possibly signal more cuts to come in the new year.
Reporting by Louise Egan; editing by Rob Wilson