By Julie Gordon and Ismail Shakil
(Reuters) – The Canadian economy lost more jobs than expected in January, posting its first decline since May 2021 as the Omicron-driven COVID-19 wave peaked, data showed on Friday, but analysts expect a quick rebound in coming months.
Canada shed 200,100 jobs, roughly matching the losses in January and April 2021, and the jobless rate jumped to 6.5% from a revised 6.0% in December, Statistics Canada said.
Analysts surveyed by Reuters had expected a loss of 117,500 jobs and the unemployment rate to rise to 6.2%.
“It’s a little bit weaker than we expected perhaps, but it really lines up quite well with what we saw last spring,” said Andrew Kelvin, chief Canada economist at TD Securities.
“I think it is something that we look through given that we can connect it quite directly to the lockdowns related to the Omicron variant.”
Canada’s largest two provinces, Ontario and Quebec, tightened restrictions as the Omicron variant took hold. Ontario reopened gyms and indoor dining this week, while Quebec reopened restaurants and has allowed some sports activities.
Similar patterns in the previous two COVID-19 waves led to nearly identical job losses, followed by a full rebound within one to three months. Canada’s health officials said last week Omicron infections had passed their peak https://www.reuters.com/world/americas/omicron-infections-have-peaked-nationally-canada-official-2022-01-28.
Additionally, Statscan said the jump in the unemployment rate last month was entirely due to temporary layoffs and people scheduled to start work soon, suggesting a looming rebound.
Still, the losses were harsh, particularly in high-contact services. Accommodation and food services shed 112,900 jobs, with another 48,400 net jobs lost in information, culture and recreation.
Despite the disappointing results, analysts said it was unlikely to change the calculus for the Bank of Canada, which is expected to start hiking interest rates in March.
“I don’t think this will have a big impact on the Bank of Canada,” said Doug Porter, chief economist at BMO Capital Markets. “I think their view will be that this is entirely related to the temporary restrictions and that it won’t last.”
Bank of Canada Governor Tiff Macklem reiterated this week that interest rates would soon rise https://www.reuters.com/business/bank-canada-head-says-unclear-how-quickly-inflation-will-drop-2022-02-02 and that Canadians should expect multiple increases. Money markets are betting on a first increase in March, with six in total this year. [BOCWATCH]
The Canadian dollar was trading 0.8% lower at 1.2772 to the greenback, or 78.30 U.S. cents.
(Reporting by Ismail Shakil in Bengaluru and Julie Gordon in Ottawa, additional reporting by David Ljunggren in Ottawa and Fergal Smith in Toronto; Editing by David Goodman, Chizu Nomiyama, Jane Merriman and Paul Simao)
