Economy sheds 54,000 jobs in October, manufacturing behind most of the losses

Canada’s jobs market suffered its biggest loss in 2.5 years last month, driving the unemployment rate up two notches to 7.3 percent as the economy shed a massive 54,000 jobs overall, most of them in manufacturing and construction.

It was the biggest one-month job loss since March 2009, in the midst of a the worst recession in decades, and came amid persistent fears that Europe’s debt crisis, the weak U.S. recovery and slower Asian growth will hit Canada.

The employment report from Statistics Canada was even more disturbing in the details, as all the losses and more were in the full-time category and in the goods producing sector.

In all, 71,700 full-time jobs vanished during the month — Ontario alone shed 75,400 — as part-time employment rose slightly, making the headline number appear more palatable.

Economists had expected a weak October after September’s surprising 61,000 pick-up, although that was somewhat inflated by returning education workers. But the consensus was for nothing worse than a moderate increase of 15,000.

As it turned out, the October report showed the biggest decline since 2009, when 61,000 jobs were shed in March. However, the magnitude of the decline was nowhere near the 129,000 jobs lost in January 2009, and last month’s losses followed two years of gradual employment gains in Canada.

Statistics Canada pointed out that employment is still up 237,000 in the last year, but the last four months has seen virtually no increase in employment overall.

As well, last month was the first significant contraction in the labour market in almost two years, the agency said.

“This is an extremely loud warning shot for the economy,” said Bank of Montreal economist Douglas Porter. “The pressing question now is whether this steep pullback represents a correction from that surprising strength [in first half of year], or the start of a new dismal trend?”

Scotiabank’s Derek Holt said he is more inclined to look past the “volatility” of the monthly headline numbers and look to the underlying factors. And those show a widespread weakness.

He points out that hours worked dropped 0.2 percent in October, following a 0.3 percent decline the previous month despite the increase in employment, and that wage gains continue to slow to 1.3 percent over last year.

“The headline volatility from one month to the next should be dismissed, but it’s the structural trends here that are disturbing,” he said. “The trend on job growth and the weakening trend on hours and wages, all combined they suggest that Canadian paycheques are softening as a cyclical driver for consumer spending.”

A report from CIBC pointed out that while the economy continues to replace the jobs lost during the recent recession, most have been of a lower paying variety, as suggested by the tepid gain in average wages.

Holt added that gross domestic product is basically a measure of hours worked times productivity, so the September and October reductions suggest the economy could be near contraction levels for those two months.

The October jobs report is the first significant economic indicator that appears to point to a downturn in the Canadian economy, which many had predicted following the upheaval in markets and plunge in consumer and business confidence surveys since August.

Recently, the Bank of Canada warned it believed the Canadian economy was cooling quickly and would record only a 0.8 percent growth rate in the fourth quarter, of which October is the first month.

It also said that Europe had entered a mild recession and that the U.S. was close to falling back into a slump.

The bulk of October’s labour market setback was in the goods producing industries, with manufacturing registering a second consecutive month of losses, this time shedding 48,000 workers. That brings employment in the key sector 2.7 percent lower in the last year.

As well, the construction sector declined by 20,000, although the industry remains positive for the year as a whole.

Natural resources, with a pick-up of about 12,000, was the only industry to report a notable gain in employment in October.

Regionally, half the provinces experienced a contraction in employment last month, but it was Ontario where the losses were the most notable.

The country’s most populous province saw a decline of 75,400 full-time jobs. There was an increase of 36,600 part-time workers, making the overall losses a lesser shock at 38,700. Quebec and British Columbia also experienced notable job losses with a contraction of 13,300 and 10,800, respectively.