CTVNEWS

Jobless rate down to 7.1 per cent in September

CTVNews.ca Staff Published Friday, October 7, 2011 10:14PM EDT Last Updated Saturday, May 19, 2012 6:12AM EDT

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The Canadian economy cranked out a surprisingly strong 61,000 new jobs last month, Statistics Canada reported Friday, pushing down the unemployment rate. But the good news did not extend to sectors such as finance, which saw heavy job losses.

The agency said there was also a 35,600 job increase for professional and scientific services. Other job gains were seen in the accommodation and food services industry, natural resources, and public administration industries.

That pushed the unemployment rate down 0.2 of a point to 7.1 per cent, the lowest level since December 2008.

Prime Minister Stephen Harper was cautiously optimistic about the state of the Canadian economy,

"The numbers will go up and down, they fluctuate month to month, the trend tends to be good," he said Friday.

However, job gains were offset by the loss of 35,300 jobs in the finance, insurance, real estate and leasing industries. There were also declines in manufacturing; and the culture and recreation industries last month.

The economy's strong showing took a number of economists aback, since many had been expecting a gain of just 15,000 jobs, according to Bloomberg News surveys.

The news was even sunnier south of the border, where the U.S. Labor Department reported a gain of 103,000 jobs – well above economists' expectations of just 55,000 jobs. But it wasn't enough to budge the U.S. unemployment rate, which remains unchanged from August, at 9.1 per cent.

Markets reacted enthusiastically to the reports at first, with the loonie soaring almost a cent to 97.31 cents US early Friday morning. But as analysts digested the numbers, and other global economic news came in, the Canadian dollar closed down 0.05 of a cent at 96.31 cents US.

The S&P/TSX composite index fell 191 points to 11,588, while the Dow Jones industrial index dropped 20 points to 11,103.12.

In Canada, the good news was that most of the net new jobs were full-time jobs. The not-so-great news is that a good portion of the increase was in self-employment.

That segment of the workforce is often less stable and the bump suggests that many workers who couldn't find regular employment were compelled to go into business for themselves.

Despite the encouraging figures, some analysts cautioned that Canadian workers may not be out of the woods yet.

"I think the numbers are really a lot softer than they appear," said Andrew Jackson, chief economist with the Canadian Labour Congress.

"It was a remarkably strong employment report for September, the bad news is the strength of the employment growth is going to slow in the coming (months)," Craig Alexander, chief economist of TD Bank added.

One problem is that real wages continue to fall, which he said is putting pressure on working families. That could hurt household consumption rates down the road, Jackson said, and could also slow down Canada's housing market.

Avery Shenfeld, chief economist at CIBC World Markets, said that Canadians "should be reasonably happy" with a jobless rate of 7.1 per cent, but only because of the more acute unemployment problem south of the border.

"I guess we could say, ‘At least we're not them,'" Shenfeld said on CTV's Power Play. "While we've had a good employment run in Canada, I would agree that there are some signs of fraying at the edges."

September's employment increase was spread across a number of industries, including the notable addition of 38,000 educational workers. But some are now worried that those numbers on teachers might have distorted the data somewhat.

Teachers' assistants and other educational workers typically see a jump of hiring every September, as workers who were laid off for the summer are rehired at the start of the new school year. Statscan usually tries to adjust its figures to account for this seasonal bump based on trends of previous years.

But the agency noted that has been difficult in recent years, because there has not been a consistent pattern in the industry of late.

This is the final jobs report before the Bank of Canada issues its next interest-rate decision, due on Oct. 25. The central bank has held the key rate steady at 1 per cent since September 2010.

Though some have been expecting the bank will cut its lending rate, these latest data should temper those expectations, as it signals Canada's economy is holding steady even amid Europe's debt crisis and weak demand from the U.S.

Here's what happened with the jobless rate provincially (previous month in brackets):