Statistics Canada reported Friday that employment fell by 13,000 in July, all in part-time jobs, and the unemployment rate rose 0.1% to 7.8%.

Today’s jobs report was weaker than expected, and likely allows the Bank of Canada room to ease rates again this year, but it was not as bad as the headline data suggests, economists say.

Bank of Montreal noted that the decline came as 18,000 part-time jobs disappeared, while full-time employment rose by 4,000.

The weakness was concentrated in educational services, which BMO Nesbitt Burns explains as a result of the double-cohort graduation in Ontario.

Among the job losses there were gains in the finance, insurance and real estate and in construction sectors. “This reflects the still relatively buoyant housing market,” BMO says. And, manufacturing employment rose a little.

“Looking ahead, the waters are likely to remain choppy for Canada’s job market over the next few months,” predicts TD Bank. “The bulk of the drag on Canada’s export-oriented industries will be felt in the second half of the year — with manufacturing and the resource-based sectors feeling most of the pain. As a result, the pace of job creation is likely to be modest at best.”

CIBC World Markets cautions that it’s dangerous to put too much stock in one month’s employment figures. “Still, the trend decline in Canadian employment is unmistakable, with employment gains now averaging just 10,000 per month so far this year, compared with nearly 50,000 during the corresponding period of 2002,” it says.

“Today’s employment report is not great news for the Canadian economy heading into the third quarter, but the details were not as weak as the headline figure suggests. Weakness in the second quarter spilling over in Q3 leaves the Bank of Canada on track to ease before year-end,” says Nesbitt.

“This morning’s employment report left little doubt that Canada’s job-creation machine continues to rattle, sputter and choke, and certainly leaves the odds of a Bank of Canada rate cut on September 3rd fully intact,” agrees TD Bank.

“At the margin the greater-than-expected weakness in employment increases the probability of a near-term rate cut by the Bank of Canada,” says BMO. “However, for this to actually occur there will likely need to be greater signs of economic weakness not only in Canada but in the US as well. With respect to the latter economy, outside of labour markets, there have been increasing indications that a recovery is taking hold.”

The U.S. Federal Reserve is set to make its next announcement on interest rates next Tuesday. The Bank of Canada will make its next announcement on September 3.