OTTAWA (Reuters) – Canada‘s job market is expected to slow markedly in December to reflect the sluggish economy and employers’ fears about the U.S. fiscal crisis following outsized gains of over 50,000 jobs in two of the previous three months.
The median forecast in a Reuters poll is for the economy to add just 5,000 jobs in the month, with forecasts ranging from a loss of 20,000 positions to a gain of 21,000.
The forecast compares with employment growth of 59,600 in November, 1,800 in October and 52,100 in September.
The unemployment rate is seen ticking higher in the final month of the year to 7.3 percent from 7.2 percent.
Derek Holt, vice president of economics at Scotiabank, said he’s been surprised by the strength of job growth which he estimates to be the equivalent in the United States of about 1.5 million non-farm payroll jobs over the last three months.
“Here we are with the conundrum where we have zero growth in the Canadian economy, long predating the appearance of the greatest fiscal-cliff risks and yet we’re heaping on jobs like there’s no tomorrow,” Holt said.
Unlike the United States, Canada has long recovered all the jobs lost during the 2008-09 recession but the pace of hiring in 2012 was unsteady.
Benjamin Reitzes, economist at BMO Capital Markets, said if the 5,000-job forecast was accurate, it would put 2012 job growth at just 1.1 percent, “the weakest non-recession year since 1996.”
Canadian employers have faced uncertainty in one form or another during the recovery and are now fretting about the U.S. fiscal cliff, a set of tax hikes and spending cuts that will automatically take effect and could throw the United States into recession unless the White House and Congress reach an alternative agreement.
“For as long as Washington cannot agree on the new tax rules and spending focus, they’re not going to give business the confidence to go out and hire and engage in capital spending projects and that’s going to impede the pace of recovery until we get more clarity,” said Holt.
With the Canadian economy now expected to grow by far less in the fourth quarter than the Bank of Canada‘s projection of 2.5 percent, annualized, the blockbuster jobs growth of recent months looks suspect. The six-month trend shows more sustainable gains of about 21,000 a month.
The moderation means the Bank of Canada will be in no hurry to raise its benchmark interest rate, which it has held at 1.0 percent since September 2010.
Market players surveyed by Reuters in late November predicted the bank would resume hiking rates in the fourth quarter of 2013.
(Reporting by Louise Egan; Editing by Kenneth Barry)
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