Canadian employers cut more jobs than expected in December for the second straight month and the unemployment rate jumped to its highest since January 2006 in a sign that the economy has likely slipped into a recession.
Statistics Canada said 70,700 full-time workers were taken off payrolls in the month, partially offset by a gain of 36,200 part-time workers for a net employment loss of 34,400. Most of the declines were in the construction sector, reflecting housing starts that fell to a seven-year low in November. The unemployment rate rose to 6.6 percent from 6.3 percent in the previous month.
The numbers were worse than the forecasts in a Reuters poll for job losses of 22,000 and a jobless rate of 6.5 percent. "Clearly not a great report ... I think the number that will get the most attention is the full-time jobs loss of over 70,000 ... That will betrading at C$1.848 to the US dollar, or 84.40 US cents, from its pre-data level of around C$1.1884, or 84.15 US cents. Bond prices remained higher. The report cements market expectations that the Bank of Canada will cut its key overnight lending rate on January 20 to help support an economic recovery.
"It definitely puts the bank in the hot seat in terms of having to deliver another rate cut ... I think the severity in that full time number is probably going to sway the bank more toward a half-point cut," said Pyle. The bank has already reduced its target rate to a 50-year low of 1.5 percent. In a survey of Canada's 12 primary securities dealers last month, six expected it to cut by another half-point this month while five expected a quarter-point reduction.
Canada's labour market had been surprisingly robust for the first three quarters of 2008 but economists expect the fourth-quarter haemorrhaging to continue through 2009. Employment growth in the year was 0.6 percent compared with 2.2 percent in 2007.