OTTAWA - Canada’s sluggish economy caused the job market to stall unexpectedly in January, adding to a string of soft data and providing another reason for the Bank of Canada to keep its policy stimulative for longer.
The economy created a negligible 2,300 net new jobs in the month as layoffs in construction and professional services offset modest hiring in manufacturing, Statistics Canada said on Friday.
The jobless rate ticked higher to 7.6 percent from 7.5 percent, the highest since April 2011, as more people were looking for work.
Analysts in a Reuters poll had predicted 23,100 new positions and a jobless rate holding steady from December at 7.5 percent.
“Obviously after a weak fourth quarter we were expecting more of a bounce back in the first quarter, but no signs of it in this report,” said Paul Ferley, assistant chief economist at RBC.
The Canadian dollar weakened to a session low of C$1.0024 to the U.S. dollar, or 99.76 U.S. cents, after the news. It traded near equal value with the greenback just ahead of the numbers.
The latest data follows a report that showed Canadian gross domestic product contracted in November for the first time since May.
Canada recovered all the jobs lost during the recession a year ago as employment growth outperformed the United States in the last couple of years.
That trend may be reversed this year. Hiring tapered off in the second half of 2011, although job gains in December had raised hopes of a continued comeback in January.
In the year to December, Canada added 129,000 jobs, a gain of 0.7 percent and the total number of hours worked increased by 1.4 percent.
The report reinforced expectations the central bank, which has held its benchmark interest rate at 1 percent since 2010, will keep policy easy through 2012 with an eye on possible fallout from the European debt crisis.
Overnight index swaps, which trade based on expectations for the central bank’s key policy rate, showed that traders priced in slightly higher odds of a rate cut later this year after the report.
Most economists have forecast the central bank will keep rates on hold until 2013.
“The report will weigh towards keeping the Bank of Canada on the sidelines, maintaining a low rate policy,” said Sal Guatieri, senior economist at BMO Capital Markets.
Full-time employment fell by 3,600 while part-time employment rose by 5,900 in the first month of 2012 and hiring was even across the public and private sectors. The number of self-employed fell by 37,000 while employees increased by 39,000, Statscan said.
The hourly wage of permanent employees, closely watched by the Bank of Canada for signs of inflationary pressures, rose 2.2 percent in January compared with a year earlier, down from 2.4 percent in December.