August 14, 2007

With unemployment down and
labour costs up, bank rate may rise

OTTAWA

The Canadian economy produced only about half the forecast job gains in July, but the overall unemployment rate still edged down a tenth of a point to 6.0 per cent, the lowest rate since 1974.

There was a net gain of 11,300 jobs, less than the 20,000 that analysts had predicted, but the rate fell anyway because of negligible growth in the labour force.

Economists said the data could push the Bank of Canada to raise its key interest rate at the next rate-setting date next month, despite the current credit crunch that is upsetting financial markets.

Only Alberta showed a significant increase in employment, with 14,000 more people working in the province.

There were 20,000 new manufacturing jobs created, along with 25,000 new positions in the professional, scientific and technical sectors, 17,000 more in transportation and warehousing and 6,000 in utilities.

Those gains, however, were offset by the loss of 57,000 positions in educational services — mostly teachers and assistants in primary and high schools — and 13,000 more in finance, insurance and real estate.

Analysts expect the drop in education jobs will be short-lived.

Although Ontario’s overall employment level was little changed in July, there were 27,000 new manufacturing jobs created in the province. That was the first significant increase in this sector in more than a year.

The report also noted that wages have increased and, on average, now are running ahead of inflation, after slower increases in the first quarter of the year.

Canadians on average were making 3.7 per cent more than in July 2006, while inflation was running at 2.2 per cent.

DCN NEWS SERVICES

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