OTTAWA (Reuters) - Canadian employers cut 70,600 jobs in November, the most in any month since June 1982, fueling expectations of a big interest rate cut next week and likely adding spark to the parliamentary crisis in Ottawa.
Statistics Canada said on Friday the biggest job losses were in Ontario, the country’s manufacturing heartland and home to its auto industry, where the U.S. economic downturn has forced layoffs.
“The great reckoning for Canadian workers begins,” said Sal Guatieri, senior economist at BMO Capital Markets.
The unemployment rate ticked up to 6.3 percent from 6.2 percent in October. Markets had forecast 25,000 job losses in November and a jobless rate of 6.4 percent.
The news, followed by equally dismal U.S. jobs data, drove the Canadian dollar lower and prompted a renewed promise of more fiscal stimulus by Finance Minister Jim Flaherty.
Flaherty said the report was evidence the economy faced “enormous challenges.”
“More needs to be done and we will take further measures to stimulate the economy,” he said.
The currency slipped to C$1.2924 to the U.S. dollar, or 77.38 U.S. cents, from C$1.2826 previously.
The shakedown of global labor markets had not arrived on Canada’s doorstep in full force until now, with a net gain of 133,000 jobs in the first 11 months of the year compared with almost 2 million shed in the United States. U.S. employers axed payrolls by 533,000 in November for the weakest performance in 34 years.
The Canadian numbers will worsen too in coming months, analysts said.
“Unfortunately, I think this is the start of a wave of job losses in Canada,” Guatieri said.
The bad news came the morning after Prime Minister Stephen Harper suspended Parliament until late January to defuse an opposition revolt over his handling of the economic crisis.
The three opposition parties have joined forces and vowed to replace Harper’s minority Conservative government as soon as possible. They accuse him of partisan jabs aimed at hurting the center-left parties in Parliament at a time when they say he should be working with them to deliver a quick stimulus package and auto sector bailout to soften the impact of a recession.
The opposition Liberals cited the job losses as reason for Harper to reconvene Parliament and draft an emergency aid plan that would cross partisan lines.
“A ‘lockout’ is the last thing Canada needs. Cooperation among parliamentarians, and action is what Canadians expect and deserve,” said Liberal legislator Scott Brison.
The soft labor market heightened expectations that the Bank of Canada will cut its key overnight lending rate next Tuesday by at least 50 basis points to 1.75 percent.
“Obviously, the weakness in the employment report will probably put a little bit more pressure on the bank in terms of expected rate cuts next week,” said George Davis, chief technical strategist at RBC Capital Markets.
Eleven of Canada’s 12 primary securities dealers, surveyed by Reuters on Friday, expected the bank to cut its key rate by 50 basis points and one expected a 75 basis point cut.
The central bank has reduced its key overnight lending rate by 225 basis points since December 2007 to 2.25 percent, compared with the U.S. comparable rate of 1 percent, and has signaled its intention to ease further.
But the severity of the November Canadian data, the weakest in 26 years following three straight months of surprisingly resilient job numbers, likely reflects the start of a recession in the fourth quarter, as widely expected.
The province of Ontario suffered the steepest decline and its unemployment rate jumped to 7.1 percent. Factory job losses in Ontario totaled 42,000 while the net employment drop in the sector nationwide was 38,000.
Hourly wages of permanent employees rose 4.7 percent in November from a year earlier, up from 4.2 percent in October.
Additional reporting by Jennifer Kwan and Scott Anderson in Toronto; editing by Peter Galloway