Canada’s August jobless rate jumps as economy sheds more positions
Canada shed jobs for a third straight month in August, in a sign higher interest rates may be starting to cool the overheated economy, official data showed on Friday, though economists said it was unlikely to force a central bank pause.
The Canadian economy lost a net 39,700 jobs in August, missing analyst forecasts that it would add 15,000, Statistics Canada data showed. The jobless rate rose to 5.4 per cent, missing calls it would edge up to 5.0 per cent from a record low 4.9 per cent in July.
“I think this can be taken as a reasonable indication that the economy is, in fact, slowing,” said Andrew Kelvin, chief Canada strategist at TD Securities.
“When you look at the increase in the unemployment rate, that does suggest that maybe a litle bit of slack is starting to return to the labour market, though it’s not a complete process and it will be a slow process,” he added.
Canada has lost a net 113,500 jobs in the last three months. In June and July the majority of those losses were atributed to people leaving the labour force, but that trend reversed in August as 66,200 people joined the workforce.
Over those same three months, job losses were concentrated in educational services, an oten volatile segment during the summer months, and wholesale and retail trade. In August, construction jobs also fell sharply.
Three straight months of job losses “hasn’t historically happened outside of a recession,” said Royce Mendes, head of Macro Strategy at Desjardins Group, adding: “The deterioration in the job market appears to be occurring faster than anticipated.”
Still, full-time employment was 3.9 per cent higher than a year ago, Statscan said.
And wage gains continued to accelerate in August, up 5.6 per cent on the year compared with 5.4 per cent in July, with more people saying they were planning on leaving their current jobs in the next 12 months, citing pay and benefits as their top reason.
That wage pressure, which can fuel inflation, will likely keep the Bank of Canada in rate-hiking mode, economists said.
“I think the Bank will be more focused upon the wage side of the picture - the modest acceleration that we have there that’s ongoing,” said Derek Holt, vice president of Capital Markets Economics at Scotiabank.
Money markets pulled back from bets of a 50-basis point increase at the bank’s next decision in October ater the data, leaning strongly toward 25 bps.
The Bank of Canada lited its policy rate to 3.25 per cent on Wednesday, its highest level in 14 years, and let the door open to more hikes amid hot inflation.
The Canadian dollar was trading up 0.4 per cent at 1.3044 to the US dollar, or 76.66 US cents.
Canada’s main stock index opened higher on Friday driven by gains in energy and material stocks, while data showed Canada shed jobs for a third straight month in August.
At 9:30 am. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 204.54 points, or 1.05 per cent, at 19,617.54.
Canada’s main stock index rose on Thursday to its highest closing level in more than one week, lited by gains for interest rate-sensitive financial stocks as investors weighed aggressive monetary policy tightening by global central banks.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 171.56 points, or 0.9 per cent, at 19,413.00, its highest closing level since Aug. 30.
Wall Street’s main indexes also posted gains as hawkish remarks from Federal Reserve Chair Jerome Powell cemented bets of a large interest rate hike by the US central bank later this month.
“Everyone’s waiting for when the Fed is going to back off from some of their aggressive policies and Powell has made it clear that he’s not going to make that pivot anytime soon,” said Greg Taylor, porfolio manager at Purpose Investments.
Meanwhile, the European Central Bank raised its benchmark lending rate by 75 basis points on Thursday, mirroring a similar increase by the Bank of Canada a day earlier.
A senior Bank of Canada official let the door open on Thursday to another oversized interest rate increase, saying the central bank continues to see front-loading as the best way to batle the fastest rising prices in nearly four decades.
The heavily weighted financials sector gained 1.6 per cent, while the materials group, which includes precious and base metals miners and fertiliser companies, added 1.5 per cent.
Energy rose 0.9 per cent as oil prices clawed back some recent declines. US crude oil futures setled nearly 2 per cent higher at $83.54 a barrel.
Canada’s employment report for August, due on Friday, could offer clues on the strength of the domestic economy.
The Canadian economy lost a net 39,700 jobs in August, missing analyst forecasts that it would add 15,000