Canada's Job Bonanza Comes to an Abrupt Halt

Daily Forex Fundamentals | Written by RBC Financial Group | Dec 05 08 14:18 GMT |

Employment dropped by 70,600 in November, a much steeper decline than market expectations of a 25,000 dip. Some of the weakness reflected anticipated job cuts associated with the temporary hiring of workers for October's federal election. StatsCan reported that 27,000 public administration jobs were cut in November. The unemployment rate edged up to 6.3% from 6.2% in October marking a two-year high. The decline in public sector jobs was almost matched with a similar number of private sector job cuts. There were cuts to both full-time (-32,400) and part-time (-38,000) employment. The goods sector saw the number of employed fall by 32,800, while service sector jobs were reduced by 37,800. There were large job losses in agriculture (-10,100) and manufacturing (-38,300) on the goods side with trade (-8,900), transportation and warehousing (-26,000) and educational services (-15,600) supplementing the job cuts in public administration on the services side of the economy. Tempering these declines somewhat were increases in the scientific services, health care, food and accommodation services and cultural industries. Ontario bore the brunt of job losses in the month, with 66,000 workers cut from payrolls, 42,000 of which were in manufacturing positions. Ontario's unemployment rate jumped to 7.1% from 6.5% in October. The key wage measure in the report, average hourly wages for permanent workers, rose 0.5% in November with the year-over-year rate picking up pace to 4.7% from 4.2% in October. The sharper-than-expected cut to November payrolls and the steady increase in the unemployment rate from its recent low of 5.8% in February are consistent with an economy that is gearing down after a modest acceleration in growth in the third quarter. The deepening recession in the United States and persistent financial market turmoil are negatively affecting Canada's growth outlook and we expect they will weigh on the labour market going forward. Our forecast is that the unemployment rate will continue to drift higher into next year as weak demand for Canadian exports and slower consumer and business spending lead to more job losses. Today's data is the one of the final reports before the Bank of Canada's meeting next week. We expect the Bank to lower the overnight rate by 50 basis points to 1.75% as policymakers try to cushion the economy from the impact of these downward pressures. RBC Financial Group http://www.rbc.com The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.