Canada's economy added more jobs than expected in August, but the pace of employment creation slowed from the first half of the year, suggesting the recovery was losing momentum, and market reaction to the numbers was unenthusiastic. Statistics Canada said on Friday employment rose by 35,800 jobs last month, but the unemployment rate edged up to 8.1 percent from 8.0 percent in July as more people entered the labour force.
The Canadian dollar jumped to a three-week high against the US dollar right after the data was released, but it turned lower as the market digested the details of the report. From a high of C$1.0287 to the US dollar, or 97.21 US cents, touched immediately after the publication of the report, the currency slipped as low as C$1.0352 to the US dollar, or 96.60 US cents.
Market operators had forecast an unchanged jobless rate and a gain of 30,000 jobs in August after a surprise drop of 9,300 jobs in July - the first decline of the year. "With the August employment rise, all of the recession's job losses have now been recouped. Put another way, there are now more Canadians employed than ever before," said Doug Porter, deputy chief economist at BMO Capital Markets.
With two months of third-quarter jobs data now out, the figures signal a less robust pace of job creation than in the first half of the year, Statscan said in its daily bulletin. "Monthly gains in employment averaged 13,000 in July and August, compared with an average monthly increase of 51,000 during the first six months of the year," Statscan said.
Analysts said the data would not overly concern the Bank of Canada, which raised interest rates on Wednesday while conceding that the economic recovery was progressing more slowly than it had predicted less than two months ago. Market pricing for the Bank of Canada will do on its October 19 interest rate decision date was little changed following the report, as measured by a Reuters calculation of yields on overnight index swaps. These swaps suggested a 61 percent likelihood of no change in interest rates next month, compared with about 66 percent late on Thursday and about in line with what most primary dealers predicted in a Reuters poll this week.
Full-time jobs increased by 79,900 while part-time positions dipped by 44,100 in August. Only six of 14 industrial sectors posted job gains. The manufacturing sector, hit hard over the last two years by a strong Canadian dollar and weak US demand, lost 25,600 jobs. But the educational sector added 68,000 jobs in August after a reported loss of 65,300 positions in July - a figure that analysts at the time described as both "mythical" and likely a Statistics Canada's struggle with seasonal adjustments in the category.
Another troubling spot was the lack of hiring in the private sector, which lost nearly 40,000 jobs in the month. The government had counted on the private sector to carry the next leg of Canada's economic recovery as government stimulus spending fades, but August showed a second straight monthly decline. The average hourly wage of permanent employees, closely watched by the Bank of Canada for inflation pressures, rose 2.3 percent in August from a year earlier. The equivalent figure for July was 2.6 percent.
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