OTTAWA (Reuters) - Trade and employment data showed Canada still mired in recession at the middle of this year, and virtually guaranteed that the Bank of Canada would keep interest rates at rock bottom until mid-2010.
Figures from Statistics Canada showed that fewer people lost their jobs in June than analysts had expected.
But that appeared to be due largely to what one analyst dubbed a “do-it-yourself recovery” -- people trickling back to work through self-employment or in part-time jobs while full-time job creation was scarce.
Net job losses in June totaled 7,400 and the unemployment rate rose to 8.6 percent from 8.4 percent in May, the highest since February 1998, Statscan said on Friday.
The data triggered a short-lived rise in the Canadian dollar, but the mood darkened on closer look at the report.
“The good news, such as it is, stops at the headline,” said Doug Porter, deputy chief economist at BMO Capital Markets.
Eric Lascelles, chief economics and rates strategist at TD Securities, said the numbers were better than expected but not proof of a recovery in the labor market.
“We need to be somewhat cautious though because the quality of those jobs are not what one might desire,” he said.
The Canadian dollar rose as high as C$1.1615 to the U.S. dollar, or 86.09 U.S. cents, after the report.
But it soon erased those gains. By 10:45 a.m., the Canadian unit was at C$1.1649 to the U.S. dollar, or 85.84 U.S. cents, down from C$1.1623 to the U.S. dollar, or 86.04 U.S. cents, at Thursday’s close.
The good news was that the pace of job losses slowed sharply in the second quarter at 13,000 compared with 273,000 in the first quarter, according to Statscan.
But the economy shed about 48,000 full-time jobs in June and added 40,000 part-time positions. Self-employment rose by 37,000, while 45,000 regular jobs were lost.
“Clearly, a grim labor market is forcing many Canadians to eke out a living through self-employment,” said Erin Weir, economist with the United Steelworkers.
Prime Minister Stephen Harper, speaking in Italy after the G8 summit, said he expects more job losses in coming months, although he put an upbeat spin on the numbers.
“Right now we have greater stability. We don’t yet have full recovery,” he said. “We have definite signs the severity of the recession is slowing.”
The data point to unchanged central bank policy on July 21 -- the bank’s next rate announcement -- and beyond. The Bank of Canada has cut its key interest rate to 0.25 percent, which it considers the lower limit, and promised to keep it there until June 2010 unless inflation spikes.
Friday’s jobs report showed that inflation was easing slightly, according to one key measure. Wages for permanent employees rose a year-on-year 3.4 percent in June, down from the average 4.2 percent pace in the first quarter.
Statscan also said Canada posted its largest trade deficit on record in May at C$1.42 billion ($1.22 billion) as energy and autos exports to the dominant U.S. market plummeted. The deficit was C$389 million in April
New housing prices slipped 0.1 percent in May and were down 3.1 percent on the year.
“The bottom line is simply that the disturbing trend of weaker global trade is continuing to be an albatross around the neck of the Canadian economy,” said Millan Mulraine, economics strategist at TD Securities.
“We expect trade to remain a source of drag on Canadian economic activity in the second quarter.”
Weak U.S. and global demand pushed exports down 6.9 percent to their lowest since September 1998. Exports fell in volume terms but also because of a sharp rise in the Canadian dollar versus the U.S. dollar in the month.
Shipments to the United States, which buys about three-quarters of Canada’s exports, tumbled 8.1 percent and Canada’s trade surplus with its neighbor shrank to C$1.5 billion from C$2.6 billion in April.
Total imports declined 3.5 percent.
Additional reporting by Frank Pingue and Nina Lex in Toronto; editing by Janet Guttsman