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Unemployment rate rises to 7.1% as Ontario hit by significant job losses

People wait for the Service Canada employment centre to open on April 2, 2014 in Montreal.THE CANADIAN PRESS/Ryan Remiorz

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People wait for the Service Canada employment centre to open on April 2, 2014 in Montreal.THE CANADIAN PRESS/Ryan Remiorz

OTTAWA - The economy's capacity to generate meaningful job growth continued to fall short of expectations last month — particularly in Ontario — as employment fell by 9,400 nationally and by 33,900 in the country's most populous province.

Meanwhile, the official unemployment rate rose one-tenth of a point to 7.1 per cent, the highest it's been in six months.

The weak jobs report from Statistics Canada on Friday defied expectations of a sizable employment gain for the month, and markets reacted by shaving almost half a cent from the value of the loonie to 93.46 cents US in early morning trading.

Economists said the result may cause the Bank of Canada to trim its growth expectations for the economy in next week's monetary policy report, while signalling interest rates will remain low well into mid-2015.

The numbers may also be starting to create problems for the federal Conservative government. Since the recovery began in 2009, federal ministers have stressed that while the economy is fragile, Canada is doing better than practically everyone else and that the country has led the industrialized world in job creation.

But the latter boast is wearing thin, particularly as Statistics Canada calculates a mere 72,000 jobs have been added over the past year. Take Alberta out of the picture and the rest of the country would actually show a loss of 10,000 jobs in the last year.

By contrast, in the U.S., 200,000-plus monthly job gains have become commonplace. The agency estimated that if Canada followed U.S. methodology in calculating unemployment, both countries would now be on par with 6.1 per cent jobless rates.

Deputy Liberal leader Ralph Goodale blasted the Harper government for being overly fixated on eliminating the deficit and "sacrificing everything else."

He said while prudent budgeting is important, "they need to learn to walk and chew gum at the same time to create economic growth. It's not coming from export sales, it's not coming from consumers and it's not coming from business, so the government needs to have policies that contribute to growth."

The most effective way to boost the economy is by investing in infrastructure, he said.

NDP Finance critic Nathan Cullen also criticized the Conservative's "laissez-fair" approach since ending the recession-era stimulus. He notes that since 2010, almost 50,000 youth jobs have vanished and as many young Canadians gave up on looking for work altogether.

Reacting to the report, Finance Minister Joe Oliver said he was focused on creating jobs and growth, adding that monthly numbers can be "volatile."

But Bank of Montreal chief economist Doug Porter believes something deeper is going on in Canada.

"Even looking beyond what happened in June, the bigger picture is that outside of Alberta we've seen no job growth in the country in the past year," he said.

"There are a number of reasons, but simply put most of what had been the bigger drivers for the Canadian job market have really subsided ... things like strong gains in home building, things coming from the consumer, even government spending. To some extent, the taps have been turned off," Porter said.

What could create more jobs in the future is a recovery in the export sector, he added, but that has been slow in coming.

"Clearly, the economy just isn't benefiting from the gradually improving U.S. economy due to trade competitiveness problems, which must be of great concern to the Bank of Canada," added David Madani of Capital Economics.

The prospects for the immediate future aren't encouraging. Earlier this week, the Bank of Canada's survey of business confidence found that Canadian firms' hiring intentions had eased somewhat from what they were three months ago.

Porter said he does anticipate some minor improvements going forward, but added Canadians should not expect a "jobs windfall."

The details of the report Friday had few bright spots. The number of Canadians officially unemployed rose by 25,000 as more went looking for work and found none.

The number would be worse if not for individuals creating their own jobs. The agency said self-employment rose by 23,400 in June, which means that employers shed 32,800 workers overall.

If there was a silver lining, it was that full-time employment rose by 33,500, partly offsetting the loss of 43,000 part-time jobs.

The major setback was among youth workers, who gave back almost all the gains of May with a drop of about 44,000 jobs.

Most of the losses in the month came in the business, building and other support services category, as well as agriculture and manufacturing. However, construction work increased by 32,000, bringing employment in the industry back to last year's levels.

Alberta was the only province to show notable job growth as full-time employment rose by 19,500.

Note to readers: This is a corrected story. An earlier version incorrectly stated the change in jobs in the headlines.

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