Wednesday, September 5, 2012 - 15:21

Canada Data Preview: August Employment Gains To Remain Subdued

OTTAWA (MNI) - Following a dismal start to the third quarter, employment in August is expected to post a modest rebound, leaving the unemployment rate at 7.3%, when Statistics Canada releases its employment report Friday.

In July, the Canadian economy unexpectedly shed 30,000 jobs, primarily due to declines in the part-time sector. This lift the unemployment rate to 7.3% from 7.2% in June. Full time growth (+21,300) was completely shadowed by the plunge in part-time employment (-51,300).

After adding 58,000 jobs in April, employment growth in Canada has continued slowly and has averaged 10,750 in the four months ending July.

Economists surveyed by MNI have centered their expectations below this average, with forecasts spanning a range of -15,000 to +21,000. The survey respondents expect the unemployment rate to stay at 7.3% with August adding 5,000 jobs.

Stefane Marion, chief economist at The National Bank of Canada expects the Canadian economy to lose yet another 5,000 jobs in August, pushing the unemployment rate up one percentage point to 7.4%.

"We think the education sector has just been too strong, and from a seasonal standpoint it will need to correct," Marion said in an interview with MNI.

Since April, the educational services sector has gained 73,500 jobs, contributing significantly to the national tally of 43,000 jobs gained across Canada for the same period amongst all industries.

The loss in the education sector "will partly be offset by increased hiring for the Quebec elections," Marion said.

"All in all we still view a number that will be negative, consistent with a labour market that is losing steam." The slowing can also be attributed to the "deceleration in corporate earnings that we have seen in Canada," Marion said.

Earlier Wednesday, a report released by the World Economic Forum said Canada fell two positions to the 14th place in Global Competitiveness index 2012-2013. Elsewhere, the Canadian Federation of Independent Business, said Canada's small business optimism continued to decline in August, falling for the fifth straight month.

Paul Ferley, assistant chief economist at the Royal Bank of Canada expects employment to surge by 21,000 in August, while the unemployment rate is expected to edge down to 7.2%.

"On the surface the increase looks large, but it is important to read in context what happened in July," Ferley told MNI.

The educational services sector is expected to moderate our "overall call of 21,000 increase," Ferley added.

The trade sector lost 30,000 jobs in July, while the professional, scientific and technical services shed 21,600 jobs, "we expect to see a bit of a reversal in August," Ferley said.

Sal Guatieri, a senior economist at Bank of Montreal (BMO) capital markets forecasts a much different result and expects August to register a 15,000 job loss, with the unemployment rate being buoyed at 7.4%.

"This decline is largely, or almost exclusively on the back of a big reduction of educational employment, largely for seasonal reasons," Guatieri said. "We should see a bounce-back accordingly in September," he added.

Besides the educational services sector, Guatieri expects "modest increases in employment across sectors consistent with an economy that is growing at a subdued rate of about 2%."

--Akhil Shah is a reporter with Need To Know News in Ottawa

** MNI - Ottawa **

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