It had to happen. We've had months of what seemed like improbably bright Canadian employment reports. With the release of the December Labour Force Survey, things seem to make depressing sense.
According to Statistics Canada, jobs fell by 18,000 in the month of
December. The decline is well above the 10,000 job loss expected by the market. Employment had climbed in each of October and November, which seemed out of sync with other economic indicators. In a headline-making sense, the real shocker is the Canadian unemployment rate which rose to 8 per cent from 7.5 per cent in November. It is now at 32 month high.
The details are particularly grim.
Following on losses of nearly 70,000 in October and November, full-time jobs slipped by another 11,000 in December. With the exception of a gain in public sector employment, there was little strength anywhere. Manufacturing jobs dipped by 6,000 taking the losses in 2001 to 111,000.
If there is any good news, it's that the markets sort of knew this was coming. Yesterday, our dollar traded precariously close to its all-time intra-day low 62.39 cents (U.S.) as traders got nervous about the report.
The worse than expected figures have sent bonds soaring. Yields at the short end of the curve dropped more than 10 basis points with the release of the data. What's going on is that the markets are starting to project forward to next week's Bank of Canada rate decision. Up to now, the consensus has been for a rate cut of 25 basis points. With the weak employment data, there may be a case of a 50 basis point cut. More jobs losses may even equal more rate cuts after that.
The Bank of Canada announcement comes at 9:00 am on Tuesday January 15th.
Stay tuned.