Unemployment rises, but less than feared

July 10, 2009

 Financial Post article published: Friday, July 10, 2009:

OTTAWA — Canada’s economy lost 7,400 jobs in June, far less than expected, even as the country continued to struggle through an economic downturn.

The unemployment rate rose to an 11-year high of 8.6%, up from 8.4% in May, Statistics Canada said Friday.

“Full-time employment continued its downward trend in June, offsetting gains in part-time,” the federal agency said. “Employment was little changed in June, leaving total net losses during the last three months at 13,000, much smaller than the 273,000 decline in the first three months of the year.”

Most economists had expected 35,000 job losses in June, with the unemployment rate rising to 8.7%.

On Thursday, however, Finance Minister Jim Flaherty warned that job losses are likely to continue for the months ahead.

Most analysts forecast the jobless rate will peak at the mid-9% range some time next year.

“In the months ahead, given the very weak backdrop for the Canadian economy, we expect the negative labour market dynamics to continue and the pace of job losses to remain fairly brisk,” Millan Mulraine, economics strategist at TD Economics, said ahead of Friday’s report.

Canada’s economy shrank 5.4% in the first quarter of this year, its fastest pace of contraction since 1991. That followed a 3.7% decline in the fourth quarter of 2008. The Bank of Canada expects the economy to contract a further 3.5% in the second quarter of 2009.

On Wednesday, the International Monetary Fund revised its outlook for the Canadian economy, saying GDP is now expected to contract by 2.3% this year, compared to its earlier forecast of a 2.5% decline. The IMF, which monitors the global economy, and provides financial and technical assistance to its 186 member nations, also raised its forecast for 2010 growth to 1.6% from the 1.2% it had predicted in April.

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