Public sector slashes 74,000 jobs in July

Finance minister links ‘volatile’ job numbers to global challenges

OTTAWA — Government policy penchants for reducing the size of the public sector have cut a major swath through Canada’s employment rolls.

In July alone, 74,000 fewer people received government paycheques — most of them were working in the healthcare sector and social assistance programs.

When all the cuts and gains are tallied, the country lost a net total of 39,400 jobs last month — many of them belonging to chronically underemployed youths, but the vast majority were public servants, Statistics Canada reported Friday.

The Harper government promised to save $5.2 billion in federal public administration costs over three years in an effort to balance the federal budget by 2015. Part of that plan included eliminating 19,200 jobs from the sector — about 4.8 per cent of the workforce. And other level s of government have been cutting staff. “Fiscal restraint, at both the federal and provincial level, has focused its eye on the civil service itself,” said Avery Shenfeld, chief economist at CIBC World Markets.

Last month’s surprisingly big drop in employment added to June’s downward trend, although far more significantly, and pointed to weaker overall economic growth than anticipated in the second quarter of this year.

The net loss of jobs in July — almost equally divided between full- and part-time positions — followed a decline of about 400 jobs in June, which came in stark contrast to a massive gain of 95,000 workers in May.

The unemployment rate rose to 7.2 per cent in July from 7.1 per cent in June, according to Statistics Canada.

“With the decrease, employment gains have averaged 11,000 per month over the six months, slower than the average of 27,000 observed during the preceding six-month period,” Statistics Canada said.

Economists had expected employment to rebound last month — by as much as 10,000 to 17,000 — and the jobless rate to remain steady.

“Volatile job numbers are another reminder that global economic challenges in Europe and elsewhere will continue to impact Canada,” Finance Minister Jim Flaherty said Friday.

Jimmy Jean, an economic strategist at Desjardins Capital Markets, said while most provinces showed declines, “Quebec stood out with a drop of 0.8 per cent (down 30,400), the most important decline since May 2005, largely in health care (down 38,000).”

The widely unpredictable monthly reading of Canada’s labour force has added to uncertainty over the country’s growth prospects this year.

Gross domestic product grew at an annualized 2.5 per cent in the first quarter of 2013, but that pace is expected to have slowed to between 1.4 per cent and 1.7 per cent during the April to June period, according to economists’ estimates.

The Bank of Canada, in its quarterly Monetary Policy Report released in July, forecast growth of 1.8 per cent this year. For both 2014 and 2015, it expects GDP to increase by 2.7 per cent. The central bank is relying on a stronger U.S. economy to help underpin that growth through improved exports and investments.

Still, the current weak growth environment will likely keep the central bank handcuffed on interest-rate policy. Its overnight lending rate has been at one per cent since September 2010 and few analysts expect a hike in borrowing costs until at least late 2014.