OTTAWA (Reuters) - Canada’s unemployment rate jumped to a seven-year high in March and the economy lost more jobs than expected, resulting in the sharpest five-month employment decline since the 1982 recession.
Statistics Canada on Thursday said net job losses in March totaled 61,300 — all of them full-time — as the economy contracted at what is believed to be the fastest pace on record in the first quarter. Analysts surveyed by Reuters had forecast job losses of 55,000.
The unemployment rate climbed to 8 percent, a level not seen since January 2002 and up from 7.7 percent in February.
The report hardens expectations the Bank of Canada will eventually make a foray into nonconventional policies to stimulate the economy as it runs out of room to cut interest rates.
“Given these sort of weak economic conditions, certainly it will keep monetary policy bias toward ease,” said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
“The issue is now whether they will respond with interest rates or move to some sort of credit easing, but certainly they will be looking for ways to add further liquidity to the system,” he said.
Economists said the report was close enough to expectations that it would have little market impact.
The Canadian dollar firmed slightly after the data, rising to C$1.2345 to the U.S. dollar, or 81 U.S. cents, from C$1.2365 to the U.S. dollar, or 80.87 U.S. cents, ahead of the data.
The central bank meets April 21 to discuss policy but its key overnight rate, already at 0.5 percent, may have reached its floor. Governor Mark Carney has promised to unveil in an April 23 report a suite of other policy tools the bank can use to combat the recession.
Analysts believe these will involve printing money to buy assets in the open market in order to bring down longer-term interest rates.
Since the labor market peaked last October, employers have shed 357,000 workers from their payrolls. In percentage terms that was the largest decline over such a short period since 1982. In terms of absolute numbers, it was the biggest decline on record.
Doug Porter, deputy chief economist at BMO Capital Markets, said the details of the jobs report were in line with expectations. Porter had been on the bearish end of forecasts.
“There were very few surprises here and this is about exactly what you would expect given the economic backdrop and the kind of losses we saw in the U.S.,” he said.
“Even the industrial breakdown is about what one would’ve expected in the month.”
The goods-producing sector was the weakest in March and manufacturing led the downward lurch by laying off 34,000 workers, followed by construction with 18,000.
The services sector expanded its work force overall but employment fell sharply in finance, insurance, real estate and leasing as well as accommodation and food services.
The average wage of permanent employees — an indicator closely watched by the Bank of Canada for signs of inflation — rose to 4.1 percent in March from a year earlier, up from 3.9 percent in February.
(Additional reporting by Frank Pingue in Toronto)
Editing by Theodore d'Afflisio