Canada’s unemployment rate dipped slightly in July to 6.1%, despite losing 55,000 jobs in the month, Statistics Canada reported today.

StatsCan said July’s job losses were offset by the number of Canadians who left the job market.

“The unemployment rate edged down 0.1 percentage points to 6.1%, as many people, particularly youth, left the labour force,” StatsCan said.

Last month’s figures represented an improvement over June, when the national jobless rate stood at 6.2%.

July’s losses came mainly from 48,000 fewer part-timers having jobs.

Central Canada was the worst performing region in July as Ontario’s flagging manufacturing sector chewed up 41,000 more jobs. Overall, the province lost 19,000 jobs.

Ontario’s unemployment rate edged down to 6.4%, but only because 42,000 people left the workforce.

Alberta lost almost 4,000 positions in July, only the second monthly loss this year.

Overall, Nova Scotia, New Brunswick, Manitoba and British Columbia saw their workforces expand in the month, while the other six provinces posted lower employment numbers.

Although today’s jobs report came in far below the expectations, most economists don’t expect it to be enough to push the Bank of Canada to cut interests rates again this year.

RBC Economics notes that for most of this year, employment has surprised on the upside, “though this was quickly reversed with this morning’s numbers for July. Hiring was much weaker than expected, plummeting 55,000 in the month. Expectations had been for a modest increase of 5,000 that would have reversed a similar-sized drop in employment in June.” Additionally, 74,000 workers left the labour force. RBC notes that the weakening job market contributed to annual growth in wages for permanent workers dropping to 3.8% in July from 4.3% in June.

“Today’s report provides strong evidence that labour markets are starting to succumb to weakening GDP growth. Although the Bank of Canada has recently put greater emphasis on the risk of inflation pressures taking hold in the economy, today’s report will re-establish the downside risks to growth as of equal concern,” RBC predicts.

“These offsetting risks will likely result in the central bank holding interest rates steady near term with the central bank monitoring the data for signs that one or the other risk has come to dominate,” RBC adds. “Our forecast assumes that the current 3.00% overnight rate will prove sufficient to eventually revive growth. As this becomes evident in 2009, the Bank of Canada is expected to very gradually remove this stimulus allowing interest rates to move higher.”

“Though most of the job losses in July were part-time, this latest jobs report depicts a worrisome trend in Canadian labour markets,” says National Bank Financial. It points out that full-time employment is down 78,000 in the last three months and the service sector — a key gauge of the underlying strength of the economy — is down 63,000. “This performance in the service sector is the worst since the 1982 recession,” it notes, adding, “This is definitely not a good omen for Canadian economic growth in the second half of this year.”

“Though a technical recession scenario is probable, the losses in full-time employment remain tamer than what is generally observed during recessions,” NBF adds. It still believes that the Bank of Canada will be to keep its benchmark rate at its current level well into 2009. “Our central bank has already cut its policy rate by 150 basis points over the past year in anticipation of slower economic growth. Yet, we must recognize that if the string of job losses endures for a couple more months at a time when economic growth in the United States deteriorates, the Bank could be forced to provide extra stimulus,” it allows.

CIBC World Markets says, “We doubt the Bank has the elbow room to ease further, since if, as we expect, energy prices head higher again, headline CPI will be uncomfortably high for an inflation-targeting central bank.”

“Back-to-back job losses, four declines in GDP in the past six months… the Canadian economy is clearly downshifting, in response to the downturn in the U.S. and the past run-up in the Canadian dollar. But, it’s still too early to talk about Bank of Canada rate cuts,” agrees BMO Capital Markets.