Canada sheds 32,200 full-time jobs in May; part-timers keep rate at 6.1 per cent

Julian Beltrame, THE CANADIAN PRESS
OTTAWA - The Canadian economy's job-creation machine stalled in May, keeping the unemployment rate at 6.1 per cent and narrowly averting an outright loss of jobs through a massive increase in part-time employment.

Still, the fact there was no outright retreat in jobs - with a modest net 8,400 created in May - showed the economy may be slowing but is not in recession, said Bank of Montreal economist Douglas Porter.

"If we were in a recession we'd be seeing monthly losses of 30,000 and 40,000 jobs, three or four months in a row," he said.

"Even if the gains in the last five months have been somewhat suspect, the fact is we've had five months of job gains and we've had five months of job losses in the U.S."

The suspect nature of May's employment report from Statistics Canada is that despite the modest advance, there were 32,200 fewer Canadians who held full-time jobs in May than the previous month, the biggest drop in that category since June 2006.

What saved the economy from the first retreat in many months was that 40,600 part-time jobs were added, mostly in additional employment for adult women and students.

Another anomaly, given the dour news coming out of Ontario's auto sector, was that manufacturers added 34,200 jobs in May, with Quebec plants gaining 13,700 jobs and Ontario's 15,300.

On Tuesday, General Motors Corp. announced it was closing its truck plant in Oshawa, Ont., throwing over 2,000 employees out of work by the end of next year.

"Given recent layoff announcements, it's hard to see the manufacturing sector as anything but a sustained source of job losses until the U.S. economy is back on its feet," said CIBC senior economist Avery Shenfeld.

He pointed out that despite May's reversal, factory employment is down 66,000 over the past year. Moreover, the sector has shed 344,000 jobs since the downturn began in 2002.

And as a key indicator of where Canada's employment picture is headed, total hours worked during the month fell 0.6 per cent.

"We've still had a lot of job growth for an economy with nearly stagnant real output in the past two quarters (so) look for a few further months of soft or even slightly declining employment," predicted Shenfeld.

Yet Canada's job market remains tight enough to keep pushing hourly wages up, an increase of 4.8 per cent in May from a year earlier, almost three times the official 1.7 per cent inflation rate.

The jobs report is the last major economic indicator that will be released before the Bank of Canada's June 10 announcement on interest rates and Porter says governor Mark Carney has a mixed bag to look at - slowing economy, stalled but not dropping job creation, and low inflation.

That will all add up to another 25 basis point cut in the overnight rate, he forecasts, but after that the central bank will head for the sidelines, where the U.S. Federal Reserve hints it already has headed.

The Canadian dollar was down slightly, 0.19 cent to 98.06 cents US on the news in early trading.

While the jobs run may be over for now, Statistics Canada did note it has been quite a gallop. The agency said there were 339,000 more Canadians working in May than was the case a year ago, a two per cent increase.

Meanwhile, the country's participation rate remained at its record high of 68 per cent in May, and women kept entering the work force in record numbers, with 35,000 more employed than last month.

"Women aged 25 and over entered the labour market in large numbers in May," the agency said. "The participation rate for adult women reached an all-time high of 62.4 per cent."

Also on the positive side of the ledger, health care, social assistance and other services added employment in May. But agriculture and professional, scientific and technical services recorded losses.

May was also a good month for students, with older students aged 20 to 24 getting the summer jobs market off to a fast start as employment in the category grew by 29,000 compared to a year earlier. Most of that was part-time, however.

Regionally, Quebec was the only province with a significant employment increase, gaining 17,900 jobs in May.

"On balance, growth of employment is moderating and total hours worked are declining in response to the stall of real GDP growth," commented JP Morgan Canada economist Ted Carmichael.

"Employers are responding to the slowdown in growth as would be expected after a lengthy period in which the labour market has been tight: they are cutting back on hours worked rather than laying off workers who were hard to find over the past two years."

However, the jobless rate is edging higher as employment growth falls behind growth in the number of people entering the workforce.

"The result is that the labour market is moving from an excess-demand situation into better balance, suggesting current wage pressures will ebb over the coming year," Carmichael said, adding that this supports expectations that the Bank of Canada will trim short-term interest rates by another quarter-point next Tuesday.

Here's what happened provincially (previous month in brackets):
-Newfoundland 12.5 (13.2)
-Prince Edward Island 9.6 (11.2)
-Nova Scotia 8.2 (7.8)
-New Brunswick 8.9 (8.3)
-Quebec 7.5 (7.6)
-Ontario 6.4 (6.3)
-Manitoba 4.2 (3.8)
-Saskatchewan 4.1 (4.3)
-Alberta 3.6 (3.3)
-British Columbia 4.5 (4.3)

Statistics Canada also released seasonally adjusted three-month moving average unemployment rates for major cities but cautions the figures may fluctuate widely because they are based on small statistical samples. (Previous month in brackets.)

-St. John's, N.L. 8.3 (8.6)
-Halifax 5.1 (4.9)
-Saint John, N.B. 6.2 (5.9)
-Saguenay, Que. 9.3 (9.7)
-Quebec 5.0 (4.7)
-Trois-Rivieres, Que. 9.5 (9.3)
-Sherbrooke, Que. 5.9 (5.8)
-Montreal 7.6 (7.5)
-Gatineau, Que. 5.3 (4.9)
-Ottawa 5.0 (4.9)
-Kingston, Ont. 5.8 (5.3)
-Toronto 6.5 (6.4)
-Hamilton 6.1 (6.3)
-Kitchener, Ont. 5.6 (4.8)
-London, Ont. 7.2 (7.0)
-Oshawa, Ont. 7.9 (7.6)
-St. Catharines-Niagara, Ont. 7.2 (6.6)
-Sudbury, Ont. 5.7 (6.0)
-Thunder Bay, Ont. 6.0 (5.0)
-Windsor, Ont. 8.2 (8.3)
-Winnipeg 4.1 (4.1)
-Regina 4.3 (4.3)
-Saskatoon 3.8 (3.4)
-Calgary 3.1 (3.1)
-Edmonton 3.9 (4.0)
-Abbotsford, B.C. 4.7 (5.1)
-Vancouver 4.0 (3.9)
-Victoria 3.0 (3.1)

Key elements of May's unemployment statistics

Unemployment rate: 6.1 per cent (6.1)
Number unemployed: 1,117,200 (1,103,800 )
Number working: 17,144,400 (17,136,000)
Youth (15-24 years) unemployment: 11.9 (11.8)
Men (25 plus) unemployment: 5.1 per cent (5.2)
Women (25 plus) unemployment: 4.9 per cent (4.7)

© The Canadian Press, 2008