Posted on March 16, 2015 by the XM Investment Research Desk at 5:18 am GMT
The latest job numbers out of Canada for the month of February were discouraging, as the impact of declining oil prices is starting to have an impact on job markets across the country. Canada is the world’s fifth largest crude producer, so oil a major export for the country. As such the Canadian dollar is sensitive to price changes in the commodity.
Statistics Canada said that the Canadian economy lost 1,000 jobs last month and the unemployment rate rose to 6.8% from a prior 6.6%. February’s job losses come after a gain of 35,000 in January. However, January’s gain consisted of part-time employment and self-employment jobs. Meanwhile, December also saw job losses.
The consequences of the global oil slump have started to seep into the country’s labour market, resulting in the disappearing of jobs in crude-rich provinces, such as Alberta, where most of the job losses occurred. The province’s unemployment rate rose to its highest level since late 2011 at 5.3% as job losses totaled 14,000.
While falling oil prices affect the labour market in the energy sector, what is more concerning is whether there will be spill-over effects into other sectors of the economy, such as in construction and retail and services related to the energy sector.
The loonie weakened to its lowest level since March 2009 against the greenback, dipping below 78 cents on Friday in reaction to the data.
The fall in crude prices led the Bank of Canada to cut its benchmark interest rate on January 21st to 0.75% from 1%. BoC Governor Stephen Poloz said that the central bank was moving swiftly to counteract the negative economic impact of lower oil prices on Canada.
Meanwhile, Canada’s neighbour to the south and main trading partner – the United States – is performing better. The economy appears to be recovering at a steady pace and the job market is robust. The latest US nonfarm payrolls data for February showed a gain of 295,000 jobs. This was the 12th consecutive monthly gain that was above 200,000 jobs. The unemployment rate fell to 5.5%, the lowest since May 2008.
The improving US economy is increasing the likelihood for a rate hike by the Federal Reserve, by at least the middle of this year.