CTVNEWS

Canada's unemployment rate rises to 8.1 per cent

CTV.ca News Staff Published Friday, September 10, 2010 11:23AM EDT

Text:

Canada's economy created 35,800 new jobs in August, yet the unemployment rate remains over eight per cent, Statistics Canada announced Friday morning.

The jobless rate rose to 8.1 per cent last month from 8.0 per cent in July -- the first time the rate has been above eight per cent since May. And it's all due to an increase in the number of people looking for jobs.

The numbers are likely to worry economists who fear that the slowing economy is taking a toll on the country's previously strong labour market.

The job gains in August were slightly better than the 30,000 new positions that economists had been expecting, but most had also been expecting the jobless rate to hold steady at 8.0 per cent.

Statistics Canada noted that much of the job gains last month were due to 65,000 contract teachers and educational workers who were re-hired in August, after reporting they were out-of-work in July. Once that seasonal variation in the education sector is discounted, it appears the economy actually shed jobs last month.

Once the job gains for July and August are averaged out, the labour market had an average pick-up of 13,000 jobs during those summer months -- much lower than the 51,000 average monthly increase seen during the first six months of the year.

The agency notes there were increases in professional, scientific and technical services and in natural resources in August.

"These gains, however, were dampened by losses in manufacturing; business, building and other support services; and information, culture and recreation," it said.

Quebec, Saskatchewan and Newfoundland had the biggest pick-ups in jobs in August, but there was little change in other provinces.

Average hourly wages rose 2.3 per cent in August from a year ago. That's up from an annual increase of 2.2 percent in July.

In a note to clients, BMO Capital Markets Deputy Chief Economist Douglas Porter said the overall report is "consistent with a broader loss of momentum in the Canadian economy."

"The muddied nature of this report doesn't change the dial on the outlook for the Bank of Canada."

Carlos Leitao, chief economist for Laurentian Bank Securities, says he's not surprised that after Canada's quick recovery from the recession, the economy would now be slowing to a "cruising speed," with slower job growth.

He notes Canada is also feeling the effects of the slower recovery in the U.S.

"There, the economy is slowing much faster than expected, so confidence in business and consumer confidence is a little shaky these, and that has an impact on hiring intentions," he told CTV News Channel following the announcement.

The slowing job growth may compel the Bank of Canada to keep interest rates steady at its next policy announcement on Oct. 19.

Earlier this week, the bank raised its benchmark interest rate to 1 per cent, saying it expects a more "gradual" economic recovery than it had projected in July.

Here are the unemployment rates provincially (previous month in brackets):