Jobless rate climbs to 8.4%

Canada's unemployment rate rose to an 11-year high of 8.4 per cent in May as the country lost 41,800 jobs, Statistics Canada said Friday.

The jobless rate was up from eight per cent in April, when the country added about 36,000 jobs.

Economists had been looking for about 36,000 jobs to be lost in May.

TD Bank economist Derek Burleton said that even though job losses have slowed from earlier in the year, the unemployment rate is expected to continue climbing as employment lags behind the economy.

"Even though we might get some bottoming in the economy over the next quarter or two, that unemployment rate risks moving higher in 2010," he said.

The Canadian dollar slipped back by 1.76 cents to 89.41 cents US in foreign exchange trading. The loonie's tumble came amid better-than-expected U.S. jobs data, coupled with the worse-than-expected Canadian data.

More full-time jobs lost

Full-time employment dropped by 58,700 last month, bringing total full-time losses since October to 406,000.  

Part-time employment rose by 17,000, continuing a trend since October 2008 that has seen 44,000 part-time workers added.

May's job losses were led by falling employment in the manufacturing sector in Ontario. Overall, the manufacturing sector shed 58,000 jobs across the country, likely led by the shutdown of Chrysler's manufacturing, said Paul Ferley, assistant chief economist at Royal Bank.

"In May 2009, there were 778,000 factory workers in Ontario, the lowest level since comparable data became available in 1976, Statistics Canada said. Manufacturing employment in Ontario peaked in November 2002 at 1,115,000 workers.

Rising dollar

Burleton pointed out that the Canadian dollar has been rising at a time when the economy is still in a vulnerable state. Since early April, the loonie has gone from 79 cents US to over 90 cents US, a move that makes Canadian exports to the U.S. more expensive, but can make imports cheaper.

"Obviously it’s disconcerting," said Burleton. "I am worried about manufacturing, and the Canadian dollar is, in my view, risking the recovery next year. So hopefully we see some abating on that trend in the weeks to come."

Burleton said TD is forecasting some economic growth at the end of this year, and some moderate growth next year.

"But that was on the assumption the Canadian dollar would remain in sort of the 80- [to] 85-cent [US] range. Now it's up over 90 [cents US] and we fear it might hit parity. So we would be looking at next year’s growth and probably shaving it back a bit," he said.

Statistics Canada said that in addition to the manufacturing sector, there were also job losses in transportation and warehousing. Public administration was the only industry with a notable employment increase.

Ontario's jobless rate hit a 15-year high of 9.4 per cent as the province lost 60,000 jobs, bringing total losses since last October to 234,000. 

While there were pronounced losses in Ontario, employment increased in Manitoba, Nova Scotia and Saskatchewan, and was little changed in all other provinces.

Statistics Canada said also said the summer student job market got off to a tough start in May, with the number of employed students in the 20-to-24 age range fell by 59,000 compared to a year earlier, all in full-time work.

May's unemployment rate was 18.3 per cent for this group of students, compared to 15.4 per cent in May 2008.

Ferley said the total decline in Canadian employment from March to May of 67,200 is much less pronounced than the 232,000 drop in the December-through-February period.

"This provides support to the view that, following the 5.4 per cent drop in first-quarter [gross domestic product], its pace of decline will ease in the second quarter, with the improving trend continuing through the end of the year," he said.

Government disappointed: Finley

During Friday's question period in the House of Commons, federal Human Resources Minister Diane Finley said the government is disappointed in the figures.

But Finley assured Canadians that the government's changes to the employment insurance system ensure more people qualify for more EI benefits now than they have in the past. She also said the government is offering EI benefits for up to two years for those who are willing to invest their retraining.

Liberal MP Scott Brison said such help is "cold comfort" to those who have lost their jobs, and accused the Tories of "turning their backs" on the manufacturing sector. 

"How can Canadians pay for their own training when they can’t even pay the bills?" Brison told the House.

Thomas Mulcair, New Democrat deputy leader, said the figures show the government's economic plan is a "sad failure."

Finley replied the government has moved to protect more than 120,000 manufacturing jobs though its emergency funding for General Motors and other auto-sector aid included in the January federal budget.

"The NDP voted against a plan that would help Canadians," she said.