The Canadian economy's record of habitually churning out robust employment growth came to an abrupt end in December, as 18,700 jobs disappeared, Statistics Canada said Friday.
The report was much weaker than analysts were expecting. The consensus had been that the country would add about 15,000 jobs. It was the first drop in employment in eight months.
The Canadian dollar immediately fell by more than a cent as the figures increased speculation that the Bank of Canada will have to cut interest rates more aggressively. The loonie was trading at 98.06 cents US at 3:15 p.m. ET, down 1.21 cents.
Douglas Porter, deputy chief economist at BMO Capital Markets, said the weak jobs report "all but seals the deal" for a Jan. 22 rate cut. That opinion was echoed by many other economists.
The main reason for the weakness was manufacturing. Statistics Canada said 33,200 more factory jobs disappeared last month, bringing 2007 losses in the sector to 132,000. Since November 2002, 348,000 factory jobs have gone.
"This is an urgent crisis that requires immediate action," said Canadian Labour Congress president Ken Georgetti. He urged Ottawa to adopt "buy Canadian" policies and bring in measures to support new investment in manufacturing.
The jobless rate in December held steady at 5.9 per cent.
For the year, the Canadian economy created a respectable 369,500 new jobs - the 15th consecutive year of employment growth.
The 2.2 per cent increase in the number of jobs from 2006 easily beat the 0.2 per cent rise in the U.S.
But Statistics Canada noted that only 47,100 of 2007's new jobs came in the private sector. The public sector was responsible for more than 208,000 new jobs. Self-employment accounted for the rest. Last month, 51,300 private sector jobs vanished.
Six of the 10 provinces lost jobs in December, led by the manufacturing heartlands of Ontario and Quebec. Alberta gained 20,900 jobs and again recorded the lowest unemployment rate in the country at 3.2 per cent - a drop of 4/10ths of a percentage point from November.
Rising wages
Statistics Canada said hourly wages continued to rise in December, increasing by 4.9 per cent year-over-year, easily topping the most recent increase in the Consumer Price Index of 2.5 per cent.
Alberta's average hourly wage of $23.50 stood well above that of other provinces, up 8.8 per cent or close to two dollars from a year earlier. The provincial wage increase was also far above the province's Consumer Price Index change of 4.7 per cent.
BMO's Porter said the "pronounced uptick" in wages and the still-low jobless rate suggest that any interest rate cuts will continue in baby steps.
He also said the report "casts doubt on just how far the [Bank of Canada] will follow the [U.S. Federal Reserve] on the way down."
Most economists have been lowering their growth forecasts for the Canadian economy this year to a range of two per cent to 2.2 per cent. While that represents a moderate slowdown from 2007, the slowdown in the U.S. looks like it will be much worse.