Canada’s unemployment rate rises unexpectedly as economy loses more jobs

Canada’s unemployment rate rises unexpectedly as economy loses more jobs

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OTTAWA, Sept. 9 (Reuters) – Canada lost jobs for the third straight month in August and the unemployment rate unexpectedly rose to 5.4%, Statistics Canada data showed on Friday, suggesting higher interest rates are starting the overheated economy to cool down.

The economy lost 39,700 net jobs in August, excluding analysts’ forecasts of 15,000 more. The unemployment rate was also worse than expected, with analysts predicting it would rise slightly to 5.0%, from a record low of 4.9% in July.

“I think this can be taken as a reasonable indication that the economy is actually slowing,” said Andrew Kelvin, chief strategist for Canada at TD Securities.

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“If you look at the rise in unemployment, that suggests that maybe a little slack in the labor market is starting to return, although it’s not a complete process and it will be a slow one,” he added.

Canada has lost 113,500 net jobs in the past three months, the vast majority of which are full-time. Despite this decline, full-time employment remains 3.9% higher than a year ago, according to Statscan.

Employment fell in the past month, especially among young women and people aged 55 to 64. The overall employment rate rose to 64.8% when 66,200 people started working.

Wage growth continued to accelerate in August, up 5.6% year-on-year compared to 5.4% in July, with more people saying they plan to leave their current job in the next 12 months, with wage growth and fringe benefits were the main reason.

Those wage pressures, which could fuel inflation, are likely to keep the Bank of Canada in rate-raising mode, economists said.

“I think the bank will focus more on the pay side of the picture – the modest acceleration we have there that’s going on,” said Derek Holt, vice president of Capital Markets Economics at Scotiabank.

“I don’t think they will be overly alarmed by the weakening of the jobs reading.”

Canada’s central bank raised its key rate to 3.25% on Wednesday, the highest level in 14 years, and made it clear that more tightening was on the way in the fight against inflation that has been high for nearly four decades. read more

The Canadian dollar gave in some of its past gains after the data. Against the US dollar, it traded 0.4% higher at 1.3035, or 76.72 US cents.

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