The Canadian economy lost 129,000 jobs in January, almost all of them full-time positions, pushing the unemployment rate up 0.6 percentage points to 7.2%.

“This drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s,” Statistics Canada said Friday.

January’s job losses far exceeded the drop of 40,000 that economists had forecast.

The loss in January follows other declines in recent months. Since October, employment has fallen by 213,000, or 1.2%, the result of full-time losses, StatsCan said.

“Today’s data add to the stream of increasingly grim reports on the state of Canada’s economy,” said Dawn Desjardins, assistant chief economist at RBC Economics Research.

The manufacturing sector lost 101,000 jobs during the month, the most on record for the industry, StatsCan said The bulk of January’s losses in manufacturing were concentrated in Ontario, which lost 36,000 positions; Quebec, which lost 30,000; and British Columbia, which shed 18,000 manufacturing positions.

The sizable job losses in this sector are a reminder that factories still play a significant role in the Canadian economy, according to CIBC World Markets economist Avery Shenfeld.

“Manufacturing no longer carries the heft it had in bygone days in terms of its share of
employment, but its ups and downs still have much to do with the business cycle,” Shenfeld said.

Losses in manufacturing were most pronounced in motor vehicle manufacturing. Employment also fell in January in the production of furniture; computers and electronics; appliances and components; and clothing manufacturing.

The good news is that at least some manufacturing jobs will return later this year when excess inventories of North American vehicles and other goods wind down, according to Shenfeld.

Employment also fell by 30,000 in transportation and warehousing, largely in truck transportation in Ontario, while employment in business, building and other support services declined by 22,000.

One bright spot was the health-care and social assistance sector. The sector continued to see strong job gains, as it added 31,000 jobs during the month.

Among Canada’s provinces, Ontario lost 71,000 jobs last month, the largest monthly drop in more than three decades, Statistics Canada said. The drop pushed the province’s unemployment rate up by 0.8 percentage points to 8% — its highest level since November 1997.

British Columbia shed 35,000 jobs as its unemployment rate also increased by 0.8 percentage points to 6.1%.

Quebec’s employment fell by 26,000 jobs, with all the losses coming in part-time work. The province’s unemployment rate rose to 7.7%.

Economists say the dismal employment news could prompt the Bank of Canada to further cut interest rates in the near term.

“We see the Bank of Canada cutting a final 50 bps at its next meeting,” said Shenfeld.

South of the border, the U.S. economy lost 598,000 jobs in January, as the jobless rate rose to 7.6% from 7.2% in December.

Wall Street economists had expected about half a million in jobs to be cut last month.

All told, the U.S. economy has lost 3.6 million jobs since the recession began there in December, 2007, with half of those losses coming in the past three months.

IE