Canada job losses surprise, but rate hike still expected

The Canadian economy unexpectedly shed over 50,000 jobs in August due to losses in part-time work, Statistics Canada data showed on Friday, but investors still expected the Bank of Canada to raise interest rates next month.
The downbeat data came a day after by hawkish comments from a senior Bank of Canada official, capping a week in which the central bank left interest rates unchanged at 1.50 percent and said more increases are needed. The disappointing jobs data did not change investor expectations for a central bank interest rate rise next month, with chances of a hike at the Oct. 24 meeting held at about 60 percent, money market data showed..
"While it is an ugly headline figure, we are pretty comfortable looking at this as just statistical noise and we still think an October hike is very likely," said Andrew Kelvin, senior rates strategist at TD Securities.
Canada's economy lost 51,600 jobs in August, taking the jobless rate rose to 6.0 percent from a record low of 5.8 percent in July. Analysts surveyed by Reuters had expected the economy to add 5,000 jobs in August and for the unemployment rate to increase to 5.9 percent. On a year-over-year basis, employment rose by 172,00 jobs, or 0.9 percent. Average hourly wages in August, a figure watched closely by the central bank, rose by 2.6 percent from a year earlier. The year-over-year increase was the smallest since the 2.4 percent gain in October 2017.
The Canadian dollar, which had been boosted by Thursday's hawkish comments from the senior Bank of Canada official, fell to C$1.3183 to the greenback, or 75.86 US cents after the jobs data.
Bank of Canada Senior Deputy Governor Carolyn Wilkins said on Thursday the central bank had discussed dropping its gradual approach to raising rates.
Canadian yields climbed in sympathy with US yields after strong US jobs data cemented expectations for the Federal Reserve increasing interest rates further.
"The Canadian numbers are a big disappointment, almost a full retracement of the prior month's big gain," said Sal Guatieri, a senior economist at BMO Capital Markets. "The only consolation is that the weakness is in part-time jobs, full-time was up."
Part-time employment declined by 92,000 jobs while full-time positions rose by 40,400 positions. After two months of gains, employment in Canada's most-populous province of Ontario fell by 80,100 jobs in August.