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U.S. shutdown expected to slow hiring in Canada

Construction workers in Montreal are seen in this file photo. Statistics Canada released its latest employment figures on Friday.

Ryan Remiorz/The Canadian Press

Canada is creating jobs at a slow-but-steady pace, but the U.S. government shutdown and its impact on business confidence are likely to dent hiring in the coming months.

Canadian employers created 11,900 jobs last month, in line with the average pace this year. The jobless rate fell to 6.9 per cent, its lowest level in nearly five years, though the drop stemmed more from fewer young people looking for work than a hiring binge.

Several factors have been weighing on employment as the economy has slowed, from ebbing public-sector hiring to factory job losses. Adding to that is a standoff now in its second week in the United States, Canada's largest trading partner and destination for the majority of this country's exports.

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The U.S. shutdown "adds to the story that job growth in Canada is going to remain sluggish," said David Watt, chief economist at HSBC Bank Canada, adding that the festering debt debate is making businesses more cautious.

Employment has risen by 12,560 on average per month this year – roughly half the pace of last year's average of 25,860, he added.

The fallout from the government shutdown has prompted Bank of Montreal to cut its economic forecast for Canada, to 2.1 per cent for the fourth quarter from 2.3 per cent.

Activity isn't expected to pick up until the middle of next year as business uncertainty, government austerity and lacklustre exports stymie growth, BMO's senior economist Benjamin Reitzes said.

Still, Statistics Canada's jobs report had bright spots. September's hiring came from the private sector and in full-time employment. Saskatchewan and Alberta are tied for the lowest jobless rates in the country, at 4.3 per cent.

Hiring rose in the financial and natural resources sectors, though it fell in public administration and manufacturing. In the past year, the construction industry has grown the most by percentage, while factory employment has seen the biggest drop. Self-employment rose 1 per cent.

Fewer people are actively seeking work, with the country's labour participation rate dropping to 66.4 per cent, the lowest since February, 2002. Some workers may be discouraged with their job prospects – but a greying population of baby boomers likely spells a longer-term shift toward a lower participation rate, Mr. Reitzes said.

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Young people moved out of the labour force. The youth jobless rate fell to 12.9 per cent last month from 14.1 per cent in August, as 21,400 fewer people sought work.

Many young people may be going back to school and upgrading skills. Enrolment at Canadian universities rose 2 per cent last year, and while it's too early to determine this year's trends, preliminary numbers for Ontario show higher enrolment this September, too.

The private sector is unlikely to drive much hiring in the months ahead, a Bank of Canada survey released Friday suggests.

The survey, conducted Aug. 26 to Sept. 19, found Canadian businesses are feeling gloomier about hiring and investing in the face of persistent economic uncertainty and weak demand.

The Bank of Canada recently cut its growth forecast for the second half of this year.

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More

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