The Canadian dollar weakened after a report showed the nation’s unemployment rate unexpectedly rose and full-time employment declined last month, bolstering the central bank’s wary outlook on the economy.
The currency fell against most of its major peers as Statistics Canada said the jobless rate increased to 7 percent from 6.9 percent, while gains in part-time work boosted total employment in May. The Canadian dollar fell earlier this week after the Bank of Canada said slower than expected growth meant the risks posed by low inflation remain even with consumer price gains at the central bank’s 2 percent target for the first time in two years in April.
“It’s like the deeper you dig into an onion, the more crying you’ll experience,” said David Tulk, chief macro strategist at Toronto-Domionion Bank. “You look at the sectors tied to extraction as well as manufacturing, both failry weak. You get a temporary squeeze from some seasonal hiring in accommodation food and education and among the youth, so that in my mind is grasping at straws trying to get the next leg of the recovery.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.1 percent to C$1.0936 per U.S dollar at 10:53 a.m. in Toronto. One Canadian dollar buys 91.44 U.S. cents.
Canada’s benchmark 10-year government bond rose, with yields falling three basis points, or 0.03 percentage point, to 2.3 percent. The 1.5 percent security maturing in June 2023 gained 23 cents to C$101.75.
Bank of Canada Governor Stephen Poloz kept the main interest rate at 1 percent on June 4 with a neutral bias whether its next move would be up or down after economic growth slowed last quarter to the lowest in more than a year.
“They probably won’t be too happy that the full time jobs numbers are relatively negative,” said Bipan Rai, director of foreign exchange strategy at CIBC World Markets, by phone from Toronto. “One month is a bit of a concern but two months might start weighing on the Bank of Canada.”
Canada added 25,800 jobs last month compared to the 25,000 new positions forecast in a Bloomberg economist survey.
Full-time employment dropped by 29,100 in May while part- time positions increased by 54,900, Statistics Canada said. That’s in line with the trend over the last 12 months where all the job gains been in part-time work.
Service-industry employment rose by 35,100 in May while jobs in goods production fell by 9,500, today’s report showed. Education rose by 21,500 and accommodation and food service work gained 19,500, Statistics Canada said. Natural resources companies trimmed their payrolls by 23,200 and manufacturing employment fell by 12,200.
“We’re really going to have to see how this plays out,” said Rai. “If we get a similar number in July, you got to imagine Governor Poloz is going to make mention of that.”
The Canadian dollar’s 1 percent decline in the past week makes it the worst performer against a basket of 10 developed nation currencies tracked by the Bloomberg Correlation Weighted Index.