Unemployment rate rises despite jobs growth

Canada’s economy began creating jobs again in December after two consecutive months of declines, but it was not enough to keep the unemployment rate from edging up a notch to 7.5%.

Statistics Canada said the unemployment rate rose one-tenth of a point despite the jobs increase because more Canadians entered the labour force.

The pick-up of 17,500 jobs was welcome news after November and October’s significant setbacks of 73,000, yet overall, there was little to cheer about in the first major economic report card of 2012.

The agency noted that all the gains were in the weaker categories of part-time and self-employment, whereas full-time work fell by 25,500 and the number of employees in the country declined by 13,600 in December.

The losses were offset by gains of 43,100 in part-time work and 31,100 in self-employment.

“In general, growth in the labour market is fairly consistent with expectations,” says Benoit P. Durocher, senior economist at Desjardins. “Economic conditions deteriorated over the last few months, notably due to the problems in Europe and upheaval in the financial markets. It is therefore no surprise that Canadian businesses are being cautious in limiting hiring.”

Every province in Canada saw a slight increase in employment except Quebec, where big losses in the construction and health care and social assistance sectors contributed to a decline of 25,700 jobs.

The December labour market report does little to change the overall picture of an economy that is struggling to create sufficient employment to keep up with growth in the population and new entrants.

After a strong start of the year, Canada has now gone six months without any significant job gains. Statistics Canada said of the 199,000 jobs created in 2011, almost all came in the first six months.

Economists speculate that the uncertainty in the global economy, particularly concerns that Europe may not be able to contain its sovereign debt crisis, is keeping employers on the sidelines.

As well, Canada now faces some structural weaknesses, such as high household debt and a slowing housing market.

CIBC chief economist Avery Shenfeld said the poor jobs reports recently give Canada a little less reason to feel smug about the economy.

“Taking the string of the last few months together, Canada’s job market still looks soft and a rising unemployment rate has been in contrast with the drop seen stateside,” he wrote in a note.

While Durocher says the unemployment rate will remain around 7.5% throughout 2012, he points out that the Canadian job market already bounced back from the depths of the recession.

“The Canadian labour market showed particularly lively growth in 2010 and during the first half of 2011,” Durocher says. “Unlike some other parts of the world (particularly the United States), Canada’s labour market recovered some time ago. Under current circumstances, employment growth should be more in step with growth in production over the next few months.”

In December, manufacturing accounted for all and more of the jobs increase, adding 30,400 workers, while construction saw a drop of 12,000. For the year, however, the factory sector remains in the hole by 50,000 jobs.

The agency said that for 2011 as a whole, the services sector of the economy was responsible for almost all the job gains, as employment rose significantly in the accommodation and food services industries, and professional, scientific and technical services.

Meanwhile, overall employment in the goods producing sector was flat with gains in natural resources and construction cancelled out by declines in utilities and manufacturing.