Economy sheds 54,000 jobs in October

Nearly 1.4 million Canadians are unemployed and some analysts predict the jobless rate could hit eight per cent next year as the economy continues to slow.

September’s report showed the biggest one-month job loss since March 2009, in the midst of the worst recession in decades, and came amid persistent fears that Europe’s debt crisis, the weak U.S. recovery and slower Asian growth will hit Canada.

With economic worries and stock market turmoil eroding consumer and business confidence, the pace of hiring is slowing and the prospects of a strong consumer spending rebound is diminishing.

Companies nervous about the future are scaling back hiring intentions until they get more confident that demand for their products and services will grow.

Asked about the report after the conclusion of G20 meetings in France, Prime Minister Stephen Harper said he was “disappointed with the numbers and concerned about them.”

Harper and Finance Minister Jim Flaherty have stressed for months that jobs are the number one priority of the government, and have hinted new stimulus measures might be forthcoming if economic conditions worsened.

Ken Lewenza, president of the Canadian Auto Workers union, said the October jobless report is “a clear sign of a faltering economy and worse yet to come.”

“Canadian politicians must stop using the economic problems of other nations to justify inaction here at home,” said Lewenza, who represents Canada’s largest industrial union.

The labour leader called on Harper to organize a national summit between, unions, business and government to come up with ideas to create jobs and grow the economy.

In the wake of the unemployment report, the Canadian dollar fell sharply by nearly a cent on the news to 98.28 US cents in afternoon trading.

Friday’s jobs report from Statistics Canada was even more disturbing in the details, as all the losses and more were in the full-time category and in the goods producing sector.

In all 71,700 full-time jobs vanished during the month — Ontario alone shed 75,400 — as part-time employment rose slightly, making the headline number appear more palatable.

Economists had expected a weak October after September’s surprising 61,000 pick-up, although that was somewhat inflated by returning education workers. But the consensus was for nothing worse than a moderate increase of 15,000.

As it turned out, the October report showed the biggest decline since 2009, when 61,000 jobs were shed in March. However, the magnitude of the decline was nowhere near the 129,000 jobs lost in January 2009 and last month’s losses followed two years of gradual employment gains in Canada.

Statistics Canada pointed out that employment is still up 237,000 in the last year, but the last four months has seen virtually no increase in employment overall. As well, last month was the first significant contraction in the labour market in almost two years, the agency said.

“This is an extremely loud warning shot for the economy,” said Bank of Montreal economist Douglas Porter.

“The pressing question now is whether this steep pullback represents a correction from that surprising strength (in first half of the year), or the start of a new dismal trend?”

Scotiabank’s Derek Holt said he is more inclined to look past the “volatility” of the monthly headline numbers and look to the underlying factors. And those show a widespread weakness.

He points out that hours worked dropped 0.2% in October, following a 0.3 decline the previous month despite the increase in employment, and that wage gains continue to slow to 1.3% over last year.

“The headline volatility from one month to the next should be dismissed, but it’s the structural trends here that are disturbing,” he said.

“The trend on job growth and the weakening trend on hours and wages, all combined they suggest that Canadian paycheques are softening as a cyclical driver for consumer spending.”

A report from CIBC earlier this week pointed out that while the economy continues to replace the jobs lost during the recent recession, most have been of a lower paying variety, as suggested by the tepid gain in average wages.

Holt added that gross domestic product is basically a measure of hours worked times productivity, so the September and October reductions suggest the economy could be near contraction levels for those two months.

“No matter how you look at this report, it’s a negative report,” said TD Bank chief economist Craig Alexander.

“I should say I don’t think it’s the start of a trend. I don’t think we’re going to get month after month of declining jobs, (but) basically job growth in Canada has stalled.”

There was some good news for the North American economy as a whole Friday. The U.S. report, which came out shortly after Canada’s, found an additional 85,000 jobs south of the border in October, and added another 120,000 on upward revisions on the previous two months. That trimmed the unemployment rate to nine per cent from 9.1.

Canada’s jobs downturn is the first significant economic indicator that appears to point to a downturn in the Canadian economy, which many had predicted following the upheaval in markets and plunge in consumer and business confidence surveys since August.

Recently, the Bank of Canada warned it believed the Canadian economy was cooling quickly and would record only a 0.8% growth rate in the fourth quarter, of which October is the first month.

It also said that Europe had entered a mild recession and that the U.S. was also close to falling back into a slump.

The bulk of October’s labour market setback was in the goods producing industries, with manufacturing registering a second consecutive month of losses, this time shedding 48,000 workers. That brings employment in the key sector— hit hard by the slump in the United States and a high loonie — 2.7% lower in the last year.

As well, the construction sector declined by 20,000, although the industry remains positive for the year as a whole.

A softer housing market and a scaleback in commercial construction as well as the end of many infrastructure projects could explain the latest drop.

Natural resources, with a pick-up of about 12,000, was the only industry to report a notable gain in employment in October.

Regionally, half the provinces experienced a contraction in employment last month, but it was Ontario where the losses were the most notable.

The country’s most populous province saw a decline of 75,400 full-time jobs. There was an increase of 36,600 part-time workers, making the overall losses a lesser shock at 38,700. Quebec and British Columbia also experienced notable job losses with a contraction of 13,300 and 10,800 respectively.