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(Deborah Baic)
(Deborah Baic)

Job market held back by struggling U.S. Add to ...

The slowdown in Canada's recovery is spreading to the labour market as employers gird for a sluggish period.

After recouping all the jobs lost during the recession, the economy has shed positions in two of the past three months as the sputtering U.S. recovery saps Canada's momentum. The International Monetary Fund has cut its 2010 forecast for Canada, citing "mainly external" risks, and Bank of Canada Governor Mark Carney is expected to pause his interest-rate hiking campaign later this month and scale back his projections for Canada and the United States.

"It's quite clear the Canadian economy has lost a step or two, whether you look at output, spending or jobs," said Douglas Porter, deputy chief economist of BMO Nesbitt Burns in Toronto. "The omens are there for much more modest job growth in the year ahead."

Canada's economy lost 6,600 jobs in September, Statistics Canada said Friday, adding to a report from the Bank of Canada showing fewer of the executives it surveys plan to boost staffing levels in the next year.

Though the unemployment rate slipped a notch - to 8 per cent - as fewer people looked for work, the hiring spree earlier this year as the economy rocketed out of the downturn is giving way to a tepid labour market.

Statistics Canada's reading of the labour market, however, was actually stronger than the overall job losses suggest. Higher paying, more stable full-time jobs rose for a second consecutive month, the private sector added positions, while the number of hours worked is gradually increasing.

But job growth in Canada will likely remain sluggish as long as the U.S. economy is mired in a slow, grinding recovery where record-low interest rates have failed to produce the borrowing and spending needed to support hiring.

The world's largest economy shed 95,000 jobs last month, the U.S. Labor Department said Friday, and the jobless rate has now topped 9.5 per cent for 14 straight months, the longest stretch since the 1930s.

"It's fair to say that the easy gains in the job market are over," Mr. Porter said, noting that two areas that have fuelled Canadian job growth - government and construction - are both fizzling out as the housing market stabilizes after the boom of last fall and the first few months of the year, and as stimulus spending winds down.

Over the past year, job growth in the public sector has swelled by 3.7 per cent, outpacing the private sector, with 2.4-per-cent growth.

With the slower job creation, Ottawa should extend its stimulus spending, rather than end it in March of next year as scheduled, and extend jobless benefits for unemployed workers, said Ken Georgetti, president of the Canadian Labour Congress.

Speaking in Edmonton, Prime Minister Stephen Harper said he had expected better jobs numbers for September, but that his government would stick to its plan to end the stimulus spending on schedule and switch to "much greater emphasis" on deficit reduction because Canada's economy is still better off than it was at the outset of the slump.

"I don't think there's anything that would indicate we should change course," Mr. Harper said. "We've said very clearly there's going to be some bumps along the way."

The jobs data all but guarantee that the Bank of Canada's Mr. Carney will step to the sidelines on Oct. 19 and hold the benchmark interest rate at 1 per cent after three straight increases, economists said.

At the same time, the central bank's Business Outlook Survey, also released Friday, included some encouraging news for policy makers.

Companies said they plan to ramp up investment in machinery and equipment, something Mr. Carney has urged them to do to help them compete with overseas rivals and prepare for a world in which the economy won't be able to rely as much on an aging work force to produce growth.

The paradox is that, in theory, a shift from investing in people to investing in equipment could mean less need to hire workers at a time when unemployment is still high.

However, Stewart Hall, an economist with HSBC Securities in Toronto, said that doesn't have to be the case.

"Some of these corporations, what they're going to be doing is investing in their businesses to expand capacity, which invariably may mean you get further job growth," Mr. Hall said. "Business investment is a very necessary part of the recovery equation. They're not mutually exclusive."

With files from The Canadian Press



The Canadian economy lost 6,600 positions in September, the second drop in three months. Details of the report were mixed, though the overall picture is clearly one of slowing job creation. Here's a breakdown:


Youth employment fell by 42,000 last month. Young people haven't seen any job growth in the past year even as the economy recouped all the jobs lost during the recession. Older workers, 55 and older, continue to land jobs and represent the highest growth rate of all demographic groups in the past year. Of middle-aged workers, men are getting hired faster than women.


The jobless rates for the Northwest Territories and Yukon are among the lowest in the country. By contrast, Ontario's jobless rate remains at 8.8 per cent. For the first time in more than a decade, Newfoundland doesn't have the country's highest unemployment rate - PEI surpassed it, at 13.6 per cent, last month.


Private-sector employment rose in September, while the number of self-employed people is falling. In the past year, growth in the public sector has outpaced private-sector growth, at 3.7 per cent versus 2.4 per cent. Public-sector hiring is expected to slow as governments trim budgets and stimulus spending runs out.


Full-time gains outstripped part-time losses in September. Over the past year, however, part-time employment has grown by 4.6 per cent, outstripping the 1.5-per-cent growth in full-time positions.


Job growth among most industries was muted. The exceptions were increases in transportation and warehousing, and a loss in professional, scientific and technical services after that sector saw one of the biggest increases over the past year.

Tavia Grant

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