ROBERT GALBRAITH
After recouping almost all of the jobs lost during the recession in less than a year, Canada's employment machine has hit a wall.
Employers slashed 139,000 full-time jobs in July while adding almost 130,000 part-time positions, Statistics Canada said Friday, and the unemployment rate edged back up to 8 per cent. The unexpected net loss of 9,300 jobs marks the labour market's first decline this year and comes after increases of more than 93,000 jobs in the previous month and a record 109,000 jobs two months earlier. The jobless rate rose unexpectedly from 7.9 per cent in June, when it had dipped below 8 per cent for the first time since early 2009.
Economists argued that the surprise decline probably doesn't indicate a new trend of job losses, noting that the Canadian labour market is in much better shape than that of the U.S., which some say could take a dozen years to recover the 8.4 million jobs that vanished during the downturn. U.S. jobs data Friday added to mounting evidence that the recovery in the world's biggest economy is losing steam, in turn raising fears over the potential impact on Canada's economy.
"Until that economy finds its feet, anybody on the Canadian side who's concerned about exports has to be worried," said Peter Hall, chief economist at Export Development Canada. Because of the U.S. weakness and belt-tightening measures in Europe, he said, the entire world is "still in this `middle zone' between the end of recession and the beginning of a real recovery."
The Organization for Economic Co-operation and Development validated that view this week, reporting that its composite leading indicator fell 0.1 of a point in June, indicating a "possible peak'' in the global rebound.
In the United States, private sector employers added 71,000 jobs in July, the U.S. Labour Department said, fewer than anticipated and not enough to cut into the 9.5-per-cent unemployment rate as the U.S. Census Bureau laid off tens of thousands of temporary workers.
U.S. stocks fell after the jobs data, and Bloomberg News reported that the yield on the two-year Treasury note - the security that's most influenced by Federal Reserve policy - sank to a record low as speculation intensified that the U.S. central bank may need to take new steps to prop up the economy. Fed chairman Ben Bernanke and his officials meet Tuesday in Washington.
"I think at this point they're in wait-and-see mode, but they will reiterate that if there is a deterioration in the economy, then they will do more," said Christopher Probyn, chief economist at State Street Global Advisors in Boston. "They won't do much next week, but they will repeat that they are ready, willing and able to do more if required."
Adding to evidence that the weak labour market is restraining consumer spending - which makes up about 70 per cent of the U.S. economy - a report from the Fed showed consumer credit declined by $1.3-billion in June after a $5.3-billion drop the month before, suggesting Americans are too worried about their jobs and the economy to borrow.
In Canada, the full-time job losses included drops of more than 65,000 at schools, plus about 30,000 in finance, insurance, real estate and leasing, in part because the housing market is cooling across the country. On Thursday, the Toronto Real Estate Board said home sales in July were 34 per cent lower than the same month a year earlier, and data from Vancouver and Calgary this week showed even sharper decreases in those cities.
Still, since July of 2009, Canada's economy has created 393,700 jobs, Statscan said. Manufacturing, one of the hardest-hit industries when exports to the U.S. plunged in late 2008, saw a monthly gain of about 29,000 jobs - the biggest increase in two years and an indication that sales abroad aren't being hurt yet.
Economists keyed in on those bright spots, and also questioned whether the results in the educational sector may be skewing the overall picture. Every July for the past four years has included a huge drop in education-related jobs, said Toronto-Dominion Bank economist Francis Fong, but they have been largely recouped in August and September.