The Canadian economy lost a startling 129,000 jobs in January, almost all full-time positions and a record single-month total, Statistics Canada reported Friday.
This brings the cumulative total for the last three months to 213,000 and pushes the unemployment rate to 7.2% from 6.6%.
“This is a bad report all across the range,” said Derek Holt, vice-president of economics at Scotia Capital. “The time to be an optimist falls by the wayside with a report like this.”
The single-month record loss was just over three times the consensus estimate of 40,000 among Bay Street economists. StatsCan released adjusted numbers that show the economy lost 63,000 jobs and 20,000 jobs, respectively, in November and December.
“The triple-digit print was off the charts,” said Michael Gregory, senior economist at BMO Capital Markets. “The recession deepened at the start of 2009 and we are likely to see the jobless rate rise above 8% by year end.”
He added the “bleak” report would likely prompt the Bank of Canada to cut its key benchmark-lending rate, at 1%, at its next decision date in March.
The record-setting job loss numbers mirror results from the United States, which reported Friday that employers shed 598,000 jobs in January, the deepest cut in payrolls in 34 years. The U.S. jobless rate now stands at 7.6%.
The Canadian dollar had lost more than US1¢ on the news before recovering somewhat. Also, the Toronto stock market’s benchmark index is up by over 100 points in early trading.
Statscan said the drop in employment was most pronounced in manufacturing, - in particular the auto sector - where the net loss totalled 101,000. There were declines in most other industries. The only sector posting a notable gain was health care and social assistance, where employment increased by 31,000.
Canada’s three largest provinces accounted for the entire employment decrease in January, with Ontario recording its single biggest one-month loss, 71,000, in three decades. January’s data pushes that province’s unemployment rate to 8%, the highest since November, 1997. Statscan added that the province has lost 125,000 jobs since October.
There were also large declines in both British Columbia, 35,000, and Quebec, 26,000. Employment was little changed in all other provinces.
Both the public and private sectors experienced job losses, Statscan said. Employment fell by 1.2% in the public sector, while the private sector declined 0.9%.
A report this week from the economics team at Toronto-Dominion Bank indicated that the country stands to lose 325,000 jobs in 2009 as major industries slash production in response to weaker demand, pushing the unemployment rate to 8.8%. Meanwhile, Bank of Nova Scotia forecasts job losses of 220,000 this year with the unemployment rate settling at 8%.
The recent federal budget said the $40-billion stimulus package would create or maintain 190,000 jobs. Jim Flaherty, the Finance Minister, said in the budget that the government would introduce further stimuli if required, a point he repeated Thursday in advance of the jobs report which he indicated would be “regrettable.”
Mr. Holt said the new data raises more doubt about the optimism expressed by the Bank of Canada in its last monetary policy update, in which it suggested the economy would rebound by a robust 3.8% in 2010.
“We are going to dig a deeper pit in the near-term and have a muted recovery,” said Mr. Holt, whose bank projects the Canadian economy will shrink 1.6% in 2009 – compared to the Bank of Canada’s 1.2% reduction — and post a modest gain of 1.6% in 2010.
But not all economists were as bearish. Yanick Desnoyers, assistant chief economist at National Bank Financial, said the unemployment rate will rise but reach nowhere near the double-digit levels of the last two recessions.
“With the [stimulus] plan taking effect probably in the second half of the year and a very accommodative monetary policy coming from the Bank of Canada, we still believe that the current recession will be shorter than the two previous one and are forecasting a more subdued rise in unemployment rate, with a target between 8% and 9%.”
