OTTAWA — Canada’s job creation engine has stalled, but the federal government is giving no hints it is preparing to intervene.
For the second month in a row, the economy created virtually no additional employment, actually losing 5,500 jobs in August. That brought the unemployment rate up a notch to 7.3 per cent, Statistics Canada reported Friday.
Economists predict it may get worse before it gets better.
“Definitely a disappointing number,” said Derek Burleton of TD Bank. “I am bothered by the fact that goods sector employment has been flat for the last six months, that’s not a good omen.”
Burleton said with the global economy slowing, Canada could see its unemployment rate rise to 7.5 per cent or higher by the end of the year.
Economists had expected a 21,500-job gain in August coming off a mostly flat July, but part of the calculation was based on the belief there would be a spike in education-related employment in preparation for September’s start of classes. That did not materialize and could should up in next month’s data.
But next month may also bring the first real indicator of how much August’s financial market meltdown and subsequent loss of consumer and investor confidence spooked employers.
The economy’s lack-lustre performance in August mirrors the zero job gains reported in the U.S. for the month, suggesting the two countries’ economies are headed south in tandem.
There were other signs of weakness Friday. Following Thursday’s strong exports number, Statistics Canada reported that productivity had declined 0.9 per cent in the second quarter, and housing starts fell in August to a seasonally adjusted annual rate of 184,700 units — down from 204,500 in July.
In response to weakness south of the border, U.S. President Barack Obama appealed to legislators in a major address Thursday night to open up the fiscal spigot again and pump $450 billion into job creation.
TD Bank estimates the package of tax cuts and spending could add 800,000 jobs to U.S. payrolls and lift growth by 0.8 percentage points in 2012, both of which will have spinoffs in Canada, particularly for manufacturers and exporters.
There were no signs Ottawa was thinking along the same lines, however, despite Stephen Harper’s remark Thursday that he will be “flexible” on the need to support jobs going forward.
Finance Minister Jim Flaherty said Friday morning from Marseilles, France, where he was meeting his G7 counterparts, that Obama’s package is similar to what Canada had already done in 2009. On the Canadian side, he looked for the sweet in the sour drink.
“What I do see in these numbers is more full-time jobs and that’s encouraging. The major part of the growth in jobs has been on the full-time side,” he said in a television interview.
Economists also took comfort in the addition of 25,700 full-time workers, although most were in the public sector, which helped offset a 31,200 decline in part-timers.
Markets were not impressed, however. The Canadian dollar took an immediate hit, dropping about half a cent on the release, and kept sliding. It was down nearly a full cent in noon trading to 100.30 cents US before recovering slightly to close at 100.40 cents US, down 0.81 of a cent.
The Canadian Auto Workers urged the government to take measures to create jobs, saying workers are vulnerable to a double-dip slump.
“There are clear signs that our economy is struggling and facing down another potential recession,” said Ken Lewenza, the CAW president. “Our government can keep denying that fact, or they can take proactive measures to lessen its impact on Canadians.”
Economists warned Canadians should prepare for a tough jobs market going forward.
“Jobs momentum has clearly been lost in Canada,” said Scotiabank economists in a note to clients.
“It further calls into question the Bank of Canada’s (second half of year) optimism as the effects of a global confidence shock work their way through the economic variables.”
“Looking through the statistical fog, the underlying trend in Canada’s job market is beginning to cool,” agreed Bank of Montreal economist Douglas Porter.
But Burleton did not believe the losses were severe enough to force the government’s hand on stimulus, at least not yet.
Most of August’s losses were in the key goods producing industries. Construction fell by 24,000, transportation and warehousing declined by 14,000 and the natural resource industries shed 12,000 workers. Students had a hard time all summer with an unemployment rate of 17.2 per cent, well above the 14 per cent level that existed prior to the recession.
At big pick-up of 50,000 in the health care and social assistance sector helped offset the decline.
On aggregate, the job losses occurred in the private sector and among part-time workers.
Thanks to robust results in the early part of 2011 when the economy was stronger, Canada’s has still managed to create 193,000 jobs this year, Statistics Canada noted. Over the past 12 months, 223,000 jobs have been added.
“Over this period, full-time employment increased by 2.2 per cent (300,000), part-time work declined 2.3 per cent (77,000), and total actual hours worked rose by 2.6 per cent,” Statistics Canada noted.
Earlier this week, Bank of Canada governor Mark Carney warned that the second half of 2011 would be weaker than previously predicted and that the export sector would face difficulties in foreign markets due to decreased demand and the high dollar.