UPDATE 1-Canada purchasing activity contracts in November

* Ivey index contracts for first time since December 2007

* Employment component slows for a third month in a row

* Canadian dollar weakens after the report

TORONTO, Dec 4 (Reuters) - Purchasing activity in the Canadian economy contracted in November for the first time since December 2007, data showed on Thursday, in another sign that recession is looming.

The Ivey Purchasing Managers Index was at 40.2 in November, down from 52.2 in October. Analysts surveyed by Reuters had expected a reading of 50.5.

A reading of 50.0 indicates that activity remained flat from the preceding month, while a higher reading indicates an increase and a lower reading reflects a slowing or decrease.

The index is the joint project of the Purchasing Management Association of Canada and the Richard Ivey School of Business.

The employment index showed contraction for a third straight month, falling to 42.2 in November from 48.5 in October. The prices index fell sharply to 51.6 in November from 78.5 in October.

The Canadian dollar slipped about 30 basis points to around C$1.2650 versus the U.S. dollar following the Ivey report.

The index is not seasonally adjusted and there is no distinction between manufacturing and services.

For details of this month's index, please see here (Reporting by Ka Yan Ng; editing by Peter Galloway)