By Julie Gordon
OTTAWA (Reuters) - Canada lost far more jobs than expected in January, with the declines driven by coronavirus lockdowns in populous Ontario and Quebec, while the unemployment rate rose sharply, Statistics Canada data showed on Friday.
Canada lost 212,800 jobs in January, the largest monthly decline since the height of the first wave in April 2020, more than four times the average analyst prediction of a loss of 47,500 jobs. The unemployment rate climbed to 9.4%, its highest level since August, missing analyst expectations of 8.9%.
Employment remains 4.5% below pre-pandemic levels.
"It's definitely a disappointment," said Derek Holt, vice president of Capital Market Economics at Scotiabank. "We're going through a soft patch and better days are ahead. So I would view it as a transitory loss."
Both Ontario and Quebec shuttered many nonessential businesses in late December, seeking to curb an expected surge of COVID-19 cases following the holiday season. New infections soared across Canada in early January, but have edged back down to an average 4,061 new cases daily.
Quebec has said it will start loosening restrictions next week, while Ontario has allowed schools in some cities to reopen and is expected to announce next week a path for businesses to reopen.
With many retailers shuttered in January and the restrictions also hitting hotels and food services, service sector employment plunged by 236,200 jobs. Employment in the goods sector rose by 23,400.
Full-time employment was up by 12,600 while part-time employment fell by 225,400 positions.
"There are some aspects that aren't quite as dire as the headline would suggest," said Doug Porter, chief economist at BMO Capital Markets, pointing to the losses being concentrated in part-time work and sectors hit by the shutdowns.
"When we look ahead ... the fact that the losses are so heavily confined to a couple of sectors that were shut down does indicate that if and when things begin to open up again, those job losses should be reversed relatively quickly," he added.
The Canadian dollar was trading 0.3% higher at 1.2792 to the greenback, or 78.17 U.S. cents.
The large decline in employment was seen reinforcing the Bank of Canada's pledge to hold interest rates at 0.25% into 2023.
Canada's trade deficit, meanwhile, narrowed more than expected in December, Statistics Canada data showed. Exports rose on energy products, while imports fell on consumer goods.
(Reporting by Julie Gordon; additional reporting by David Ljunggren in Ottawa and Fergal Smith and Nichola Saminather in Toronto; editing by Jason Neely, Frances Kerry and Jonathan Oatis)