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Zohra Surani,21, left and Melinda Cuffy, 23, pore over jobs listings at the Summer Jobs Services centre at 511 Richmond S.t West in downtownToronto. (Fred Lum/The Globe and Mail)
Zohra Surani,21, left and Melinda Cuffy, 23, pore over jobs listings at the Summer Jobs Services centre at 511 Richmond S.t West in downtownToronto. (Fred Lum/The Globe and Mail)

Canada's job growth falters slightly as wages stalled Add to ...

Canada’s labour market showed modest growth in July, but a slipping recovery in the United States and a deepening debt crisis in Europe are threatening to end months of job gains.

The Canadian economy created 7,100 jobs in July, Statistics Canada said Friday. That was only half of what economists had predicted, but still enough to build on three consecutive months of growth.

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The jobless rate fell to 7.2 per cent, its lowest level in more than two years, and down from 7.4 per cent a month earlier – though that decline was partly caused by a drop in the number of people looking for work.

An increase in the number of full-time workers and strong gains in the private sector added optimism to the job report.

“I think when you drill down and look at the details, the report was more positive than negative,” said David Madani, Canadian economist at Capital Economics.

The jobs picture was also positive in the United States, with stronger-than-expected numbers reported on Friday. The U.S. economy added 117,000 jobs last month and the jobless rate in the U.S. dropped slightly to 9.1 per cent from 9.2 per cent.

But the U.S. improvement wasn’t enough to calm investors who watched stocks tumble Thursday in the biggest single-day drop since the 2008 financial crisis. Major stock indexes in Europe and the United States rallied briefly after the job numbers were released on Friday morning, then fell once again.

That instability has economists concerned that recent job growth, at a three-month average of 19,300 in Canada, could falter.

“As much as, I think, [Canada’s jobs report]was a positive report and on balance good news, it is very much looking in the rear view mirror,” said Doug Porter, deputy chief economist at BMO Financial Group.

He noted that global financial conditions have changed significantly over the past month, when the jobs data was collected. “I simply don’t believe the kind of wonderful job gains we saw in the first seven months of the year can possibly continue through the remainder of the year.”

The private sector added 95,000 positions in July, with construction, transportation and warehousing, and retail and wholesale sectors leading the gains.

The construction sector posted the biggest increase, with an additional 31,000 jobs created in July, following three months with little change. Statistics Canada reported Friday that the value of building permits rose 2.1 per cent in June from the previous month, driven by higher construction intentions for industrial and institutional buildings in Ontario and multi-family homes in British Columbia.

At the same time, there were fewer jobs in health-care and social assistance and education, and the number of public administration and management jobs was also down, clawing back overall job gains.

An additional concern, warned Derek Holt of Scotia Capital, is the slowdown in wage growth in July to just 1.4 per cent, which is negative after factoring in inflation.

“In that context, I think we have a fairly bleak set of conditions for the consumer. Your average Canadian isn’t seeing fast enough wage growth to compensate for the rising cost of gasoline and what they’re throwing in their grocery carts,” he said.

With a report from CP

Follow on Twitter: @kimmackrael

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