OTTAWA: Canada’s economy unexpectedly shed jobs in January, while housing starts plunged, suggesting global uncertainty, weak prices for Canadian oil, and a government clampdown on the property market will drag on growth in early 2013.
A slew of weak data released on Friday quickly knocked the Canadian dollar below parity with the US dollar. Adding to the gloom were figures showing Canada posted a record trade deficit in 2012.
Statistics Canada said 21,900 people lost their jobs in January, surprising markets, which had expected a gain of 5,000 jobs after two very strong months of employment growth.
The jobs data could push the Bank of Canada off its slightly hawkish tilt, said Mark Chandler, strategist at RBC Capital.
The central bank has been saying for months that it will need to increase, not cut, interest rates, although in January it said that move was “less imminent”.
“Clearly ... jobs creation last year was unsustainable and we have to brace ourselves for something more sustainable this year,” said Stefane Marion, chief economist at National Bank Financial.
“You might have to reassess your growth expectations for the domestic economy this year, which means, in my view, that the Bank of Canada remains on the sideline through this year and no move before early 2014.”
The Bank of Canada last month slashed its forecast for fourth quarter annualized growth to 1.0 percent from 2.5 percent.
Challenges for the economy include weak foreign markets, a relatively strong Canadian dollar and discounted oil prices that are cutting into government revenues.