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Winnipeg Free Press - PRINT EDITION

Unemployment rate highest in nine months

Feds told to put austerity on hold; just 2,300 jobs created in January

By: Julian Beltrame

Posted: 02/4/2012 1:00 AM | Comments: 0 (including replies)

OTTAWA -- Canada's jobs engine appears to have stalled in line with economic growth, prompting some leading economists to call on Ottawa to hold off announced spending cuts.

The country's unemployment rate rose to a nine-month high of 7.6 per cent last month, Statistics Canada reported Friday, as an addition of a mere 2,300 jobs proved insufficient to cover the increase of 23,700 Canadians looking for work.

In Manitoba, unemployment stayed at 5.4 per cent, third-lowest in the country. There were 300 more people working in January than December, but all the increase came from part-time employment. There was a 3.7 per cent decline in the number of full-time workers in the province.

If the national results had been a one-month blip, economists might have looked the other way. But January was merely the continuation of a half-year stretch of disappointing results. Since October, the economy has shed an average of just under 10,000 workers a month.

The bad news piled up Friday with the announcement that American-based Caterpillar Inc. will close its Electro-Motive plant in London, Ont., a month after it locked out 450 workers.

"I think (austerity) is unnecessary at this particular time, and it will become increasingly clear as we progress through the year, because the economy is going to slow, the unemployment rate is going to be drifting up and housing is going to be weakening," said analyst David Madani of Toronto-based Capital Economics.

"Why do it now when the economy is that weak? It just seems over the top."

In a note to clients, Bank of Montreal economist Douglas Porter also questioned why now would be an appropriate time for austerity measures, saying the federal deficit is about $9 billion below last year's pace.

"The case for deeper near-term restraint is far from compelling," he said. "Growth is now struggling and has few obvious engines of support in 2012."

Madani said although the government's planned spending cutbacks of between $4 billion and $8 billion, along with phasing out stimulus programs and imposing a departmental budget freeze, are not the same magnitude of austerity imposed in some European nations, they are sufficient to potentially "injure" the economy.

As they have all week, opposition MPs hammered the government benches Friday about the austerity measures, including the intention to rein in Old Age Security in future years.

In the absence of Finance Minister Jim Flaherty, who will be producing a new budget in a month's time, House Leader Peter Van Loan gave no indication the Harper government was rethinking its plans.

"We are very fortunate that Canada has been doing well relative to other major developed economies," he responded, noting more than 600,000 new jobs have been added since the end of the recession in summer 2009.

But that boast appears to have an expiry date.

U.S. employment has been rising faster than Canada's for months, and Friday's stateside labour report showed the recovering American economy generated 243,000 new jobs in January, the best in nine months. The U.S. unemployment rate is now inching closer to Canada's, falling to 8.3 per cent.

Friday's jobs report did contain a few bright spots. Although overall employment was flat, there were 39,200 employees added, offset by a similar decline in self-employment.

By sector, employment rose in education, information, culture, recreation and other service industries in January. There was a big loss of 45,000 workers in professional, scientific and technical services industries and in construction. Manufacturing saw a small pickup but remains 44,000 jobs down over the last 12 months.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition February 4, 2012 B4

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