March Marks Another Month of Hefty Job Losses in Canada

Employment in Canada fell by 61,300 in March, a slightly bigger decline than forecasts for a 50,000 jobs loss. This was the fifth month of job cuts which totaled 357,000, the bulk of which occurred in the first quarter of 2009. The unemployment rate shot up to 8% from 7.7% in February in line with expectations.

Another month of cuts to full-time employment resulted in 79,500 jobs lost while part-time employment rose by 18,200. Employment in the service-producing industries stabilized after February's 71,200 cut to payrolls. Goods producers bore the brunt of the weakness in March with the number of employed falling by 62,600.

On an industry basis, losses in the goods-sector were concentrated in manufacturing (-34,200) and construction jobs which fell by 18,200. Natural resource companies also cut another 10,500 from their payrolls. We expected a rebound in employment in the auto industry after the extended holiday shutdowns however these failed to materialize. On the services side, wholesalers and retailers cut another 6,000 jobs; the accommodation and food services industries sliced 15,200 from their payrolls and finance, insurance and real estate reported declining payrolls, losing 19,800 positions.

Regionally the decline in employment was fairly broad-based with the biggest cuts coming in British Columbia, Alberta and Ontario.

The year-over-year growth in the key wage measure in the report, average hourly wages for permanent workers, picked up to 4.1% in March after slowing sharply (to 3.9%) in February.

Since January, Canada's economy lost a total of 272,900 jobs. March's decline made it five months in a row of job cuts which Statscan touted as the largest percentage drop since the recession of the early 1980s. The unemployment rate has risen at a staggering pace from a generational low of 5.8% at the beginning of 2008 to 6.6% at the end of the year and 8% at the end of the first quarter of 2009. This pace of increase clearly outflanked the rise in the unemployment rate during the economic slowdown earlier this decade (it increased to 8% from 6.7%) but is less than the 4.8 to 5.8 percentage point increase recorded in the early 1980s and 1990s recessions. That being said, we expect the unemployment rate to continue to move higher in the months ahead given the weak state of the economy and persistent uncertainty in financial markets.

However, with the considerable monetary policy and fiscal stimulus hitting up in Canada, we believe conditions are in place for the economy to start to recover mid-year especially if the nascent signs of stability in the US economic and financial markets build momentum. All eyes are on the Bank's statement on April 21 which will deliver the framework for quantitative and credit easing and we look for policymakers to reiterate their commitment to keeping interest rates low until the economy is growing sufficiently strong to close the output gap and limit downside risks to the inflation outlook.

RBC Financial Group
http://www.rbc.com

The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.