Ottawa, Sept. 12 (BUS): Canada canceled jobs for the third straight month in August, a sign that higher interest rates may have begun to cool an overheating economy, official data showed on Friday, although economists said it is not Likely to impose a pause the central bank.
Statistics Canada data showed that the Canadian economy lost 39,700 jobs in August, below analyst expectations that it would add 15,000 jobs. The unemployment rate rose to 5.4%, missing phone calls that will rise to 5.0% from a record low of 4.9% in July, Reuters reports.
“I think this can be taken as a reasonable indication that the economy is in fact slowing,” said Andrew Kelvin, chief Canadian strategist at TD Securities.
“When you look at the increase in the unemployment rate, it suggests that maybe a little bit of slack is starting to come back into the labor market, even though it’s not a full-fledged process and it will be a slow process,” he added.
Canada has lost 113,500 net jobs in the past three months. In June and July, the majority of these losses were attributed to people leaving the workforce, but this trend was reversed in August as 66,200 people joined the workforce.
During those same three months, job losses were concentrated in educational services, a segment that often fluctuates during the summer months, and wholesale and retail trade. In August, construction jobs also fell sharply.
Three consecutive months of job losses “have not historically occurred outside of a recession,” said Royce Mendes, head of macro strategy at Desjardins group, adding: “The deterioration in the labor market appears to be happening faster than expected.”
However, full-time employment was 3.9% higher than it was a year ago, Statscan said.
Wage gains continued to accelerate in August, up 5.6% year over year compared to 5.4% in July, with more people saying they were planning to leave their current jobs in the next 12 months, citing wages and benefits as the main reason behind this.
Economists said wage pressure, which could fuel inflation, is likely to keep the Bank of Canada in a position to raise interest rates.
“I think the bank will be more focused on the wage side of the picture – the modest acceleration we have there and it’s continuing,” said Derek Holt, vice president of Capital Markets Economics at Scotiabank.
Money markets backed off bets on a 50 basis point increase in the bank’s next decision in October after the data, and tilted strongly around 25 basis points.
The Bank of Canada raised its interest rate to 3.25% on Wednesday, its highest level in 14 years, and left the door open for further hikes amid rising inflation.
The Canadian dollar traded 0.4% higher at 1.3044 per US dollar, or 76.66 US cents.