October job losses suggest choppy recovery

OTTAWA — Canada's job market took a step backward in October, all but wiping out gains of the previous two months and sending another warning signal that the nation's economic recovery could be sputtering.

The unemployment rate rose 0.2 percentage points to 8.6 per cent as employers shed 43,200 jobs last month, Statistics Canada reported Friday. That followed two months of job gains in which the country added a combined 57,700 positions.

If there's a silver lining, it's that all the losses were in part-time jobs, and the economy actually added 16,500 full-time positions.

But economists, most of whom had been expecting a modest overall gain, were not impressed.

"The report points to lingering uncertainties and ongoing restructuring pressures," TD economist Grant Bishop said in a research note. "This means that the job market will likely rebound in fits and starts, consistent with historical experience in the early recovery phase post-recession."

The disappointing job figures come a week after it was revealed that the Canadian economy unexpectedly shrank in August. Taken together, the two reports suggest the recovery is turning out to be softer than expected.

As usual, many economists are looking to the United States to drive the Canadian recovery. But although the American economy returned to growth in the third quarter, a weak job market continues to be a drag, even though the pace of job losses is slowing. Employers shed 190,000 jobs south of the border in October, pushing the unemployment rate above the dreaded 10 per cent threshold at 10.2 per cent.

That will do little to shake the Bank of Canada from its commitment to hold interest rates at rock-bottom levels until the end of next year. At a meeting of G20 finance ministers this weekend in St. Andrews, Scotland, Finance Minister Jim Flaherty is expected to encourage other countries to come up with "exit strategies" for withdrawing public stimulus funds from their economies. The Conservatives say they will let Canada's stimulus measures expire next year, as originally planned.

But some economists are cautioning the government not to turn off the taps too soon. On Friday, the International Monetary Fund warned G20 leaders that the global economy remains fragile, with much of the recovery still being driven by government spending.

"We have to be careful about taking away the goodies too quickly, before the economy can stand on its own two feet. A true fiscal belt tightening may have to be put off until 2011," CIBC World Markets chief economist Avery Shenfeld said in an interview.

In Canada, most of the job losses came in the retail and wholesale trade sector, which lost 30,800 positions. Employment in the manufacturing sector, which has lost 218,000 jobs since October 2008, was little changed.

Regionally, the biggest losses were in Alberta, which dropped 14,900 jobs, and British Columbia, which saw 12,900 positions evaporate.

Overall, the Canadian economy has shed 400,000 jobs since the employment market peaked in October 2008.

In the House of Commons, the Conservatives insisted their economic plan is working, but acknowledged the recovery could be unsteady.

"We need a clear, entrenched economic recovery in Canada and abroad, mostly in the United States, our largest partner, before we will see a true and strong recovery," said Ted Menzies, Flaherty's parliamentary secretary.

The job numbers hurt the loonie, which fell 83 basis points to 93 cents U.S. Friday.

On the Toronto Stock Exchange, the S&P/TSX composite index edged up 69.72 points to close at 11,250.42.