Employment details are out for December and the numbers are worse than expected, showing Canada's economy lost 34,000 jobs in the last month of the year.
Along with that, the nation's unemployment rate jumped to 6.6 per cent, up from 6.3 per cent in November, according to the numbers released by Statistics Canada on Friday morning.
"This was larger than markets had been expecting," Craig Alexander, deputy chief economist of TD Bank Financial Group, told CTV's Canada AM.
"They had been anticipating a 20,000 job loss and the unemployment rate came up to 6.6 per cent, again worse than expected because markets were looking for 6.5 per cent," he said.
The jobless numbers pulled the loonie down by almost a full per cent against the U.S. dollar on Friday morning. It fell by 0.96 cent to 83.89 cents U.S.
The Toronto stock market also fell sharply, reacting to employment statistics in Canada and the U.S., which reported that it lost more than half-a-million jobs last month. Toronto's S&P/TSX composite index dropped 131.2 points to 9,090.4.
Analysts said the higher jobless numbers will almost certainly mean that the Bank of Canada will cut interest rates on Jan. 20.
Friday's unemployment numbers mark the second straight month that job losses have been recorded in the Canadian economy. In November, 71,000 jobs were lost.
While the job-loss numbers are jarring, Alexander said "the details are actually worse than the headline."
There was a total loss of 71,000 full-time jobs in December, though the number was partly offset by an increase in part-time jobs, he said.
The majority of the full-time jobs that were lost, Alexander said, were in Alberta and Ontario.
In Alberta, the losses reflected the trickle-down impact of falling commodity prices. In Ontario, the numbers were a direct result of the struggling manufacturing sector, Alexander said.
"The bottom line is these numbers are consistent with the view that the Canadian economy contracted in the last three months of the year," he said.
In all of 2008, StatsCan said, Canada gained a net total of 98,000 jobs. In the previous year, the economy added 358,000 jobs.
All of last year's gains came from part-time jobs. Much of the year ahead won't be much better, say analysts.
"With economic contractions in the cards over the first half of 2009, expect the unemployment rate to head towards eight per cent before coming back down as the economy stages a recovery in the latter part of the year," CIBC World Markets spokesperson Krishen Rangasamy told The Canadian Press.
Finance Minister Jim Flaherty delivered an equally blunt assessment of Canada's employment situation in the months ahead.
"We're in for a difficult year," Flaherty said at a press conference in Thornhill, Ont. on Friday.
"We regrettably are going to have to expect continuing job losses in Canada. We are going to have substantial job losses."
