Canada shed jobs for a third straight month in August and the jobless rate unexpectedly jumped to 5.4%, Statistics Canada data showed Friday, hinting that higher interest rates are starting to cool the overheated economy.
The economy lost a net 39,700 jobs in August, missing analyst forecasts that it would add 15,000. The jobless rate was also worse than expected, with analysts having predicted it would edge up slightly to 5.0% from a record low 4.9% in July.
"I think this can be taken as a reasonable indication that the economy is, in fact, slowing," said Andrew Kelvin, chief Canada strategist at TD Securities.
"When you look at the increase in the unemployment rate, that does suggest that maybe a little bit of slack is starting to return to the labor market, though it's not a complete process and it will be a slow process," he added.
Canada has lost a net 113,500 jobs in the last three months, the vast majority in full-time work. Despite this decline, full-time employment remains 3.9% higher than a year ago, Statscan said.
Employment last month fell mostly among young women and people aged 55 to 64. The overall participation rate ticked up to 64.8% as 66,200 people joined the labor force.
Wage gains continued to accelerate in August, up 5.6% on the year compared with 5.4% in July, and more people said they were planning on leaving their current jobs in the next 12 months, citing pay and benefits as their top reason.
That wage pressure, which can fuel inflation, will likely keep the Bank of Canada in rate-hiking mode, economists said.
"I think the Bank will be more focused upon the wage side of the picture - the modest acceleration that we have there that's ongoing," said Derek Holt, vice president of Capital Markets Economics at Scotiabank.
"I don't think they will be overly alarmed by the weakening in the jobs reading."
Canada's central bank lifted its policy rate to 3.25% on Wednesday, its highest level in 14 years, and made clear more tightening was coming as it battles inflation that is running near a four-decade high.
The Canadian dollar surrendered some of its earlier gains after the data. It was trading 0.4% higher at 1.3035 to the U.S. dollar, or 76.72 U.S. cents.
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