Friday, September 08, 2006

More Evidence of the Coming Rate Cut! "Employers shed jobs for third month"


Globe and Mail Update

Canadian employers unexpectedly shed 16,000 jobs in August, the third month in a row of declines, as the number of factory workers fell to an eight-year low.

That pushed the jobless rate up a notch to 6.5 per cent — the highest since January — from 6.4 per cent, Statistics Canada said Friday.

It's the first time since 1992 the country has shed jobs for three straight months, according to Bloomberg analytics. August marked the lowest level of employment for manufacturers since March, 1998.

The weaker-than-expected report raised the chance that the Bank of Canada may eventually cut interest rates, should the trend continue. The central bank this week left its key lending rate unchanged at 4.25 per cent.

“The weak report supports the Bank of Canada's stance to hold rates steady for now, and also increases the odds of a rate cut if the weak trend persists through the balance of the year,” said Sarah Hughes, an economist with Bank of Nova Scotia, in a morning note. “Three consecutive soft reports clearly show that momentum has shifted as the year has progressed.”

Overall employment remains strong this year, despite recent losses. The economy has added 194,000 jobs this year, due entirely to full-time positions, matching the pace of job growth south of the border. Alberta alone accounts for 40 per cent of Canada's new jobs.

Gains by adult women this year, at 2.1 per cent, have far exceeded those for adult men, at 0.6 per cent.

In August, a 63,000 drop in part-time jobs outweighed a 47,000 gain in full-time positions.

Among sectors, factories shed 11,300 jobs in August, as a strong Canadian dollar ate profits and competition overseas intensified. The sectors have lost 87,000 jobs since the beginning of 2006.

The construction industry cut 8,900 jobs in August.

Services industries also cut their payrolls. The public administration sector slashed 21,100 jobs and the finance, real-estate and insurance industries, along with education sector, also reduced their headcounts.

Wage gains continue to outpace the rate of inflation. Average hourly wages increased 3.7 per cent from last year, above the most recent annual gain of 2.4 per cent in the consumer price index.

Hourly earnings in Alberta are 8.3 per cent higher than last year.

Economists polled by Bloomberg News had expected the jobless rate to fall to 6.3 per cent, with 15,900 new jobs.

Some economists cautioned not to read too much into today's report, given that it's subject to sampling errors.

“While the monthly employment change from the labour force survey of 60,000 households is closely is not always a good indicator of near-term economic momentum,” said Ted Carmichael, chief economist at J.P. Morgan.

The standard error on the monthly change is about 30,000, he said.

The six-month jobs trend, which smoothes out monthly volatility, shows average monthly gains of about 25,000 since the beginning of this year based on both the labour force survey and the survey of employment, payrolls and hours, he added.

Robust growth in full-time positions also points to underlying strength in the labour market. Full-time jobs now account for 82.2 per cent of total employment in Canada, the highest proportion in over fifteen years, noted Eric Dubé, an economist at National Bank Financial.

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