Unemployment in Canada climbed to a five-month high in February, as the oil price shock began to weigh on Alberta’s labour force.
Overall employment declined by 1,000 in February, following a gain of 35,400 in January, Statistics Canada reported on Friday. A median estimate of economists called for a drop of 5,000.
The unemployment rate rose to 6.8 percent in February, a five-month high, from 6.6 percent in January. The uptick partly reflected an increase in job-seekers, as the participation rate climbed to 65.8 percent from 65.7 percent.
Nationwide, part-time employment declined by 34,900 in February, while full-time employment increased by 34,000.
Compared to February 2014, overall employment increased just 0.7 percent, official data showed.
Friday’s report suggests that the oil price collapse was beginning to weigh on the Canadian economy. Employment in natural resources declined by 17,000 last month, bringing losses over the last two months to 26,000. Meanwhile, manufacturing employment declined for the first time since August 2014, falling by 20,000.
The bulk of the job losses occurred in the province of Alberta, which is home to Canada’s oil and gas industry. The province’s unemployment rate rose to 5.3 percent from 4.5 percent. That was the highest level since 2011. Alberta is expected to enter a mild recession this year as the impact of cheap oil takes full effect.
According to the Bank of Canada, “most of the negative impact from lower oil prices will appear in the first half of 2015, although it may be even more front-loaded than projected in January.”
The BOC is forecasting subdued growth for Canada this year. The Bank unexpectedly slashed interest rates earlier this year to 0.75 percent from 1 percent as a form of “insurance” against declining inflation.
According to the latest forecast from RBC Economics, exports will provide a lifeline for the Canadian economy this year. Canada’s largest bank forecasts the economy to grow 2.4 percent in all of 2015, down from a previous estimate of 2.7 percent, according to a revised forecast released earlier this week.
Canadian exports declined 2.8 percent in January, as exports of energy products plunged 14.7 percent, the eighth consecutive monthly decrease.