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CANADA NEWSSEPTEMBER 10, 2011Canada Suffers Surprise Job Losses
By PAUL VIEIRA OTTAWA—Canada's economy shed jobs in August, pushing up the unemployment rate to 7.3% from 7.2%, Statistics Canada said Friday, in a sign Canada's job-creating machine has stalled.
The loss of 5,500 jobs last month bucked market expectations for a 21,500-job gain, and represented the second straight month of less-than-encouraging employment data. The rise in the jobless rate was the first in seven months; analysts expect it to drift higher in the coming months on weaker growth.
The bulk of the lost jobs were private-sector, part-time positions. Softness in construction, transportation and the natural-resources sector weighed on the August results.
Adding to the Canadian economy's woes were dismal productivity figures, also released Friday, indicating that output per hour worked in the second quarter dropped by the biggest amount in five years.
"Weak jobs and weak productivity are a depressing combination," said Douglas Porter, deputy chief economist at BMO Capital Markets.
The data delivered another blow to Canada, which had been one of the stalwart economies among developed, industrialized countries. As recently as February, Canadian policy makers had boasted about how the economy recouped the 428,000 jobs lost during the 2008-09 recession.
But Canada's gross domestic product shrank in the second quarter on weak exports, joining earthquake-struck Japan as the only Group of Seven economies to decline in the April-to-June period.
August was marked by dramatic volatility in financial markets, due mainly to concern among traders about policy makers' ability to deal with fiscal woes in the U.S. and Europe. Economists say this dent in confidence has yet to work its way through the economy.
The Bank of Canada left its key policy rate unchanged this week, stating the need to raise rates had "diminished," as a slowing U.S. and global economy present a drag on exports.
Prime Minister Stephen Harper said his government would be "flexible" in managing domestic economic policy amid a fragile economy. His Conservative Party recently won a majority mandate on a promise to cut spending and return to a balanced budget by mid-decade,
At the G-7 meeting in Marseille, Canadian Finance Minister Jim Flaherty said the country's economy is "managing relatively well" despite the small August job loss. He highlighted the net gain in full-time jobs for the month.
BMO's Mr. Porter said even though the monthly decline in jobs in August was fairly small, it is another sign that momentum in the job market is fading as the global economy weakens. "I wouldn't expect a quick return to strong hiring through the rest of the year.We will be lucky to see much job growth at all," he said.
Meanwhile, Canadian labor productivity fell 0.9% in the second quarter, the biggest drop since the second quarter of 2006, as hours worked increased even though Alberta wildfires and Japan's tsunami prompted a cut in output.
Overall, the Canadian data indicated the public sector added a net 22,000 jobs while the private sector—the key economic driver—shed a net 20,600 positions. The economy added a net 25,700 full-time jobs whereas a net 31,200 part-time positions were eliminated.
Derek Burleton, deputy chief economist at TD Bank, said the weak productivity figures "are consistent with a cooling in hiring," as businesses will likely focus spending on machinery and equipment, as opposed to labor, as it looks to make up ground in terms of competitiveness.
Mr. Burleton sees unemployment rate climbing up to 7.6% by the end of the year. "We are not dealing with a job crisis here in Canada like in the United States, but any increase in the jobless rate is not a welcome development."