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(Jeff McIntosh/Jeff McIntosh/The Globe and Mail)
(Jeff McIntosh/Jeff McIntosh/The Globe and Mail)

Job losses deeper than feared Add to ...

The recession and the rain hammered summer-student employment and eliminated 45,000 jobs in July - pushing the total job losses since the onset of the downturn to 414,000, Statistics Canada said.

The unemployment rate stayed steady an 11-year high of 8.6 per cent, but only because discouraged unemployed people, mainly youth, gave up searching for a job. The labour force shrank by 53,500 people.

"[It's a]classic sign of discouraged workers throwing in the towel," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.

The job losses were in both full-time and part-time positions, concentrated in Quebec, and almost entirely in the private sector. The unemployment rate for students spiked to 20.9 per cent, its highest point on record, and more than seven percentage points higher than a year ago.

Are job losses so bad that they will threaten the start of a recovery in the third quarter?

If the pace of such job loss continues, expectations for economic growth to resume in the third quarter will have to be revisited, warned Avery Shenfeld, chief economist at CIBC World Markets.

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An economy can still grow if employment stagnates, he explained. But an economy can't muster growth if jobs are being destroyed, hurting consumer spending power.

But he hasn't given up hope that both the economy and the job market will show some improvement in August and September, since auto plants are gearing back up somewhat, and activity in the housing market is on an upswing.

Still, Canada's recovery will lag behind the United States', Mr. Shenfeld said, since second quarter growth in Canada will be much worse than the one-per-cent pace of decline measured in the United States, and the third quarter will be slower here, too.

But the relentless rain that hovered over Quebec during much of past month shouldn't be discounted as a key reason behind the fall in employment, said Philip Cross, chief of economic analysis at Statistics Canada.

"With the record rain, who needs waiters for the patio, or travel-related services?" he said.

Quebec's labour market has avoided the pain felt in Ontario, Alberta and British Columbia during this recession, but there are fears that the job losses experienced elsewhere will hit Quebec with a lag.

July's numbers, showing a loss of 37,100 jobs in Quebec, don't really fit the bill, said Mr. Cross. That's because recessions normally eat away at jobs on the goods-producing side of an economy first, and then spill over into services. But Quebec's job losses in July were mainly in services, not in the manufacturing sector that is key in that province.

But it will take more than a bit of sunshine to turn the job losses around. Other economists argue that rain in July in one region is only a small factor.

"Tourism jobs have been hit hard given recession in the U.S. and Canada, border issues, fall-like weather in July, and the high cost associated with the Canadian dollar are unhelpful events," said Stewart Hall, economist at HSBC Securities (Canada).

The declines in accommodation and food services in July were partly offset by increased employment in retail and wholesale trade, Statscan said.



The private sector took a heavy blow. Employment fell by 75,000 positions, bringing total job losses since last October to 436,000.

July's private-sector losses were the worst since the record-breaking decline in January. A 35,000 rise in self-employment partially offset the drop, but economists tend to be leery about self-employment numbers in the depths of a recession because self-employment is often a last resort.

The self-employment gain "is not necessarily a good thing as it underscores the lack of opportunity in the formal job market," said Charmaine Buskas, senior economics strategist at TD Securities Inc. "And as workers have fewer job prospects and bargaining power, wages have obviously suffered."

Since October, the work force has contracted by 2.4 per cent, all in full-time work. Most of the losses have been in manufacturing, construction, transportation and warehousing.

Analysts had expected to see some improvement in the construction sector, since the real estate market has been flourishing and government money for new infrastructure may be starting to flow. But after three months of little change, construction employment fell 18,000 positions in July, bringing total losses since October to 120,000 - a contraction of 9.6 per cent.

Manufacturing employment didn't change much in July, but has contracted 11.1 per cent since last fall.

By demographic, most of the recession's pain has fallen on young people - who have seen employment drop by 205,000 positions since October - and by men between 25 and 54 years old, who have lost 201,000 jobs.

In July, young people had another bad month, shedding 37,500 positions. Adult men gained jobs, however, rising 14,600 positions. Instead, adult women took a turn dealing with falling employment, losing 21,600 positions.

"It was a particularly bad month for youth employment, as the summer job market was just awful this year," said Mr. Porter.

By province, eight out 10 provinces saw declines in employment, led by Quebec, where 37,100 positions disappeared. Quebec's job losses during this recession have been far more moderate than in neighbouring Ontario, despite both provinces having a major manufacturing base. But Quebec's unemployment rate rose to 9.0 per cent in July, up from 8.8 per cent in June.

Ontario managed to post a slight employment gain in July, adding 13,700 positions as drops in construction employment were more than offset by gains in the services sector. The unemployment rate in the heavyweight province fell to 9.3 per cent from 9.6 per cent, but is still the fourth highest in Canada and well above the national average.

Average wages rose 3.4 per cent from a year ago, in line with increases seen in the previous two months. For permanent employees, wages were 3.2 per cent higher that a year ago, lower than in June.

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