* Unexpected job losses erode gains in September
* Building permits fall for third straight month in Sept
* Pace of purchasing activity slows in October
* Signs economy slowing, rates seen on hold or easing
By Louise Egan
OTTAWA, Nov 4 Unexpected job losses pushed
Canada's unemployment rate higher in October as the European
debt crisis and U.S. weakness buffeted the exporting nation's
economy and weakened confidence.
The prospect of an eventual interest rate cut by the Bank
of Canada looked more plausible after the economy lost 54,000
jobs in October, eroding most of the prior month's gains and
pushing the unemployment rate up to 7.3 percent from 7.1
Other data also suggested markedly slower growth toward the
end of the year, showing a third consecutive decline in
building permits in September and a slower pace of purchasing
activity in October.
"It looks like global economic fears and Europe's debt
crisis are taking a toll on Canadian business confidence and
hiring intentions," said Sal Guatieri, senior economist at BMO
Breaking with a recent trend, Canada's job report was more
downbeat than October's employment figures in the United
States. Data on Friday showed U.S. employment rose less than
expected in the month, but a drop in the jobless rate to a
six-month low and upward revisions to previous months' gains
pointed to some improvement.
Guatieri and other economists are now openly talking about
the possibility the central bank will begin reversing some of
the rate hikes implemented last year, if the European problems
continue to lap up on Canadian shores.
"Clearly it will discourage the Bank of Canada from raising
interest rates for quite some time. If economic conditions
deteriorate, it's possible the bank would cut interest rates.
For the moment, though, we expect steady policy."
Last month, the bank extended a year-long freeze on its
benchmark interest rate, now at just 1 percent.
None of 12 primary dealers in Canada predicted a rate cut,
according to a Reuters poll on Friday after the Statscan
release, but they did push back their expectations for the
timing of the next rate hike. Seven of 12 dealers predicted the
bank would resume hiking sometime from mid- to late 2012, the
other five see a hike in 2013.
Markets are even more dovish, pricing in an increased
chance of monetary easing in 2012.
The Canadian dollar weakened by nearly a cent to
as low as C$1.0170 to the U.S. dollar, or 98.33 U.S. cents,
after the jobs data. It later regained some ground.
With Canada at risk of losing its status as the strongest
economy among the G7 industrialized nations, both Prime
Minister Stephen Harper and Finance Minister Jim Flaherty
blamed the job woes on Europe.
"It's been more volatile and slower than we would like and
it's a reflection of a lack of confidence that's been spreading
in world markets as a consequence of the European debt crisis,"
Harper told reporters in Cannes, France, after a G20 summit to
try to prevent contagion from Greece.
Ottawa does not expect a recession in Canada but Flaherty
warned, "We're an open trading country and we get buffeted when
things become difficult elsewhere, as they are now in Europe."
The Conservative government is under pressure from
opposition parties to prepare another round of stimulus. So
far, Harper has replied only that he will be "flexible."
Canada's labor market bounced back more quickly from
the recession than U.S. employment did, and by January had
recouped all the jobs lost during the downturn. But employment
in some sectors such as manufacturing is still below the
pre-recession peak and is not expected to ever fully recover.
Statscan said total employment rose by 1.4 percent in the
past year and full-time employment grew 1.6 percent.
Still, most of the details in the October report were
negative, with the private sector shedding 32,000 jobs, and
about 72,000 full-time positions vanishing in all. Part-time
employment grew by a tepid 18,000.
Only the natural resources sector of the economy saw
significant job gains.
Another reason why the Bank of Canada has taken rate hikes
off the radar screen is signs wage pressures are subsiding,
with 1.3 percent annual wage growth in October, down from 1.6
percent in September.
Separately, Statscan reported that the value of building
permits fell 4.9 percent in September, the third straight
The pace of purchasing activity in the Canadian economy
fell in October to 54.4 from 55.7 on a seasonally adjusted