Canada losing higher-paying jobs, unemployment expected to rise: report

A dump truck works near the Syncrude oil sands extraction facility near the city of Fort McMurray, Alberta on Sunday June 1, 2014. (THE CANADIAN PRESS/Jason Franson)

Canada is losing higher-paying jobs for the first time since the 2008-2009 recession, according to a new report by Capital Economics.

In his update released Tuesday, Canada economist David Madani said job creation in the coming year will be "modest" as oil prices slump and energy producers slash investment and hiring.

The research consultancy firm said it expects Canada's unemployment rate to rise to 7.5 per cent, up from its current seven per cent, by the end of 2016.

The latest Labour Market Survey released last week by Statistics Canada showed an increase of 44,400 net jobs thanks in part to a surge in temporary election jobs. But Madani said these numbers mask "a deterioration in underlying labour market conditions."

He said unemployment among "prime age workers" who are between 25 and 54 year old and are often top earners, has "slowed dramatically."

If the economy continues to struggle as oil prices remain low, there will be more pressure on inflation, Madani said.

According to the report: "Once the inflationary effects of the weaker Canadian dollar fade next year, we expect core inflation to fall below the Bank of Canada's two per cent target, from 2.2 per cent in 2015 to 1.7 per cent in 2016."