Canada sheds 7,400 jobs in June, less than expected

Canada's economy lost 7,400 jobs in June - far less than expected - even as the country continued to struggle through an economic downturn.

The unemployment rate rose to 8.6 per cent - an 11-year high - from 8.4 per cent in May, Statistics Canada said Friday.

“Full-time employment continued its downward trend in June, offsetting gains in part-time,” the federal agency said. “Employment was little changed in June, leaving total net losses during the last three months at 13,000, much smaller than the 273,000 decline in the first three months of the year.”

Most economists had expected 35,000 job losses in June, with the unemployment rate rising to 8.7 per cent.

On Thursday, however, Finance Minister Jim Flaherty warned that job losses are likely to continue for the months ahead.

Most analysts forecast the jobless rate will peak at the mid-nine per cent range some time next year.

“In the months ahead, given the very weak backdrop for the Canadian economy, we expect the negative labour market dynamics to continue and the pace of job losses to remain fairly brisk,” Millan Mulraine, economics strategist at TD Economics, said ahead of Friday's report.

Canada's economy shrank 5.4 per cent in the first quarter of this year, its fastest pace of contraction since 1991. That followed a 3.7-per-cent decline in the fourth quarter of 2008. The Bank of Canada expects the economy to contract a further 3.5 per cent in the second quarter of 2009.

On Wednesday, the International Monetary Fund revised its outlook for the Canadian economy, saying GDP is now expected to contract by 2.3 per cent this year, compared to its earlier forecast of a 2.5 per cent decline. The IMF - which monitors the global economy, and provides financial and technical assistance to its 186 member nations - also raised its forecast for 2010 growth to 1.6 per cent from the 1.2 per cent it had predicted in April.