OTTAWA (Reuters) - The carnage in Canada’s labor market persisted in January as the recession forced layoffs across a wide array of industries, analysts say, predicting the worst multi-month string of job losses since the early 1990s.
Employers are expected to have cut 40,000 jobs in January in the third straight month of employment decline, according to the median forecast of analysts surveyed by Reuters.
They predicted the unemployment rate would jump to 6.8 percent from 6.6 percent in December, its highest level since June 2005.
The vicious circle of the economic downturn causing businesses to cut staff -- which in turn causes a further slowdown -- is in full effect, said Eric Lascelles, chief economics and rates strategist at TD Securities.
“The ball really can get rolling here and I think that’s probably the stage we’re at right now,” Lascelles said.
“We’re starting to see the layoffs happen. The economy is already clearly in recession. The question is how far does it go -- and I think it probably goes a fair bit further,” he added.
If the forecasts are right, the economy will have shed 124,00 jobs from November to January -- a magnitude of back-to-back job losses not seen since late 1991 and early 1992, according to Statistics Canada data.
Jobs were relatively safe in Canada through most of 2008, when the net gain in employment was about 80,000. That compared favorably with the United States, where employers slashed 2.6 million jobs last year.
But stories of companies idling plants and cutting staff have since become daily fare, in Canada, compounded by plunging confidence levels due to even grimmer news coming from the United States.
“The anecdotal evidence clearly points to a substantial further deterioration in Canada’s labor market over the past several weeks, including markedly elevated wait times for the processing of unemployment insurance claims, surely a sign of heightened volumes,” David Wolf, chief economist for Merrill Lynch Canada, said in a note to clients.
Companies that recently announced layoffs include forest products company Tembec, which said on Tuesday it will lay off about 1,400 workers. U.S.-based fertilizer company Mosaic Co, which operates in the phosphate-rich province of Saskatchewan, said it will cut 1,000 workers starting in February.
And the weakness, once reserved for the manufacturing and forestry sectors, now extends to services as well.
Hiring intentions are expected to continue falling throughout this year. Businesses surveyed by the Bank of Canada in the fourth quarter said they thought hiring would decrease over the next 12 months.
Despite the relative health of Canada’s job market compared with the United States, analysts are wary of guessing when it will hit bottom.
“As for the risks, let’s just say precious few economic stats have surprised on the strong side anywhere in recent months,” Doug Porter, deputy chief economist at BMO Capital Markets, said in a note.
Reporting by Louise Egan; editing by Rob Wilson