Canada's unemployment rate hits 6.1 pct

The Canadian economy lost 55,000 jobs in July, the biggest number since February 1991, due mainly to struggling manufacturing and corporate construction industries, a government agency said Friday.

Statistics Canada reported that the July unemployment rate was 6.1 percent, down one-tenth of a percentage point from June, but only because fewer people were in the work force. There were actually 55,000 fewer people working in July in Canada than in the previous month.

"Corporate Canada is beginning to think the worst, and the result has been a summer crop of pink slips," said Avery Shenfeld, senior economist at CIBC World Markets. "Employment fell a sharper than expected 55,000 in July, a second consecutive decline after months in which hiring was puzzlingly strong relative to output."

Avery said the result of the economy's recent job declines put job creation in the first seven months of the year at its weakest pace since 1992.

Most of the job losses in July came in part-time work and were centered in manufacturing, business building and other support services and educational services mainly in Quebec, Ontario, Saskatchewan and Prince Edward Island.

The pace of job growth has slowed sharply this year, with gains averaging only 10,000 a month compared with the average monthly gain of 30,000 reported for 2007.

"The Canadian economy is clearly downshifting in response to the downturn in the U.S. and the past run-up in the Canadian dollar," said Michael Gregory of BMO Capital Markets.

The Canadian dollar continued its decline after Friday's employment numbers were released, dropping 1.21 Canadian cents to 93.76 U.S. cents, to the lowest levels its seen since last August.

The only job gains across the country were in accommodation and food services, where 22,000 people were hired.

"The Canadian job boom is over," said James Marple of TD Bank.

He said the drop in the number of people seeking work suggests they have simply become too discouraged to pursue the job hunt.

Gregory said despite the job losses and a string of declines in gross domestic product in recent months, it's too early to talk about the Bank of Canada cutting its key interest rate to provide economic stimulus. Canada's central bank held its overnight rate at 3 percent last month. The country's overnight rate has dropped from 4.5 percent since December, including sharp half-point cuts in March and April.

Central banks in Canada, the United States and Europe have all recently indicated they are concerned about the potential for runaway inflation due to the trickle-down effect of higher energy prices on the economy.

However, crude prices have recently fallen from their record highs and demand for other commodities has cooled amid concerns that the slowdown that began in the United States has spread to other countries.

Marple said he expects to see volatility in the job market in the coming months.