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December’s slow national job growth points to weak gains in 2013

After a flood of new hires in November, December’s national employment numbers are expected to show only a small increase, weighed down by declines in the service sector.

J.P. MOCZULSKI/The Globe and Mail

After a flood of new hires in November, December's national employment numbers are expected to show only a small increase, weighed down by declines in the service sector.

A month ago, the Canadian mood was different. Despite lacklustre economic growth, November beat forecasts with 59,300 new positions created, with the national unemployment rate dipping to 7.2 per cent.

The majority of new hiring was in the service sector, sparking hopes of more positive economic signs to come, even though manufacturing employment was weak and softened the overall numbers.

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Economists are now expecting a correction to that trend.

Royal Bank of Canada's economics division predicts a bounce back in manufacturing jobs in December, with an increase of 30,000, making up for the decline of 19,300 and 6,200 in goods-producing industries in October and November, respectively.

However, RBC sees these stronger manufacturing jobs numbers being offset by new-found weakness in the service sector.

Service jobs are estimated to have dropped by 25,000 in December, compared with the meteoric 65,700 rise in November.

Overall, RBC sees this creating only 5,000 jobs, nudging the unemployment rate up to 7.3 per cent.

The erratic employment data haven't been in line with the overall sluggish economy.

"One area that surprised on the upside – even as the

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economy downshifted late in the year – was the notoriously volatile job market," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank.

"The unemployment rate is likely to end 2012 closer to the 7-per-cent threshold than we had thought."

Importantly, he adds that "job creation this past year is estimated to have outstripped that of output, implying an outright drop in labour productivity, which is certainly not the norm."

That lack of correlation between rising employment and weak economic output is likely to correct itself in the December numbers – and possibly into 2013 data.

"We continue to expect only gradual progress on the jobless rate, as hiring slows in the months ahead, tracking a slower pace of underlying economic activity," said Emanuella Enenajor, an economist at CIBC World Markets Inc.

She also predicts a rise of only 5,000 jobs overall and that the unemployment rate will edge up to 7.3 per cent.

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