Job losses in Canada were worse than expected in December, beating even the most pessimistic forecasts with the biggest drop since May 2003 as manufacturers struggled with a strong currency and weak US market.
Statistics Canada said on Friday the economy shed 18,700 workers last month but the unemployment rate remained unchanged at 5.9 percent and annual wage inflation, closely watched by the Bank of Canada when setting monetary policy, sped up to 4.9 percent from 4.1 percent in November.
Despite the wage gains, the report likely fuels market sentiment that the central bank will cut its key overnight interest rate for a second time since December on January 22. The job losses surprised the market, which had been expecting a pullback after three months of red-hot jobs growth but not of this magnitude.
The median forecast in a Reuters poll was for 15,000 additional jobs in December and a jobless rate of 5.9 percent. The economy had created 157,000 jobs over the previous three months. The goods-producing sector suffered job losses in the month due largely to weakness in manufacturing, which is stumbling from the effects of a 17 percent appreciation in the Canadian dollar in 2007, higher energy costs and fierce foreign competition.
Job growth in the services sector was flat although services had been the main driver of the labour market throughout last year. In another sign of weakness, all of the employment losses were in the private sector while the public sector and self-employed workers registered gains, continuing the trend of the past four months.