Canada unexpectedly sheds 9,400 jobs in June, annual growth weak

Motorized mannequins hold signs that read "Hire Me" in Toronto on May 23, 2014. Canada unexpectedly shed 9,400 jobs in June and the unemployment rate rose to 7.1 percent from 7.0 percent in May, underlining how employment growth has stalled desp
Motorized mannequins hold signs that read "Hire Me" in Toronto on May 23, 2014. Canada unexpectedly shed 9,400 jobs in June and the unemployment rate rose to 7.1 percent from 7.0 percent in May, underlining how employment growth has stalled despite a recovery in the United States. -- PHOTO: REUTERS

OTTAWA (REUTERS) - Canada unexpectedly shed 9,400 jobs in June and the unemployment rate rose to 7.1 percent from 7.0 percent in May, underlining how employment growth has stalled despite a recovery in the United States.

Statistics Canada said on Friday that the year-over year gain was just 72,300 jobs, or 0.4 percent, the lowest annual growth rate since the 0.4 percent recorded in February 2010.

Analysts surveyed by Reuters had expected a gain of 20,000 jobs in June.

"If you take the moving average for the first half of this year, it suggests very minimal job growth so far in Canada, so it has been a bit disappointing," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

Market operators expect that worries about soft growth will keep the Bank of Canada from hiking interest rates until late next year, a Reuters poll found on Thursday.

The central bank's next scheduled interest rate announcement is on Wednesday, when it will also issue its quarterly monetary policy report.

The Bank of Canada has kept its key interest rate at a near record low 1.0 percent since September 2010 and says it will not contemplate a hike until inflation picks up and the economy absorbs more excess capacity.

"The unemployment rate also ticks a little bit higher so it doesn't really speak to much of an improvement in the absorption of capacity, consistent with our view that the bank will still sound dovish next week," said David Tulk, chief Canada macro strategist at TD Securities.

The economy created 33,500 full-time jobs in June but lost 43,000 part-time positions. Employment fell in manufacturing and business, building and other support services, while more people found jobs in construction.

The six-month moving average for employment jumped to 8,800 from 3,000 in May, when the figure included a net loss of 44,000 jobs in December 2013.

The Canadian dollar weakened to a session low against the greenback, dropping to C$1.0686, or 93.58 US cents, down from Thursday's close of C$1.0647, or 93.92 US cents.

The unimpressive jobs data follow recent reports suggesting the Canadian economy might be gaining strength.

Inflation in May hit a 27-month high of 2.3 percent, above the Bank of Canada's 2.0 percent target, while rising exports almost wiped out Canada's trade deficit the same month.

Retail sales in April jumped by 1.1 percent to an all-time high while wholesale sales that month advanced by 1.2 percent, twice as fast as expected.