Canada lost 19,000 jobs in April, a result that was far weaker than expected, and one that economists are blaming on SARS.

Economists were calling for a jobs gain of 10,000, and they had been getting used to seeing much stronger numbers over the past year. But this time around they were well on the high side, as the country had its worst month in two years. The jobless rate also jumped two ticks to 7.5% in response.

“The emergence of SARS –which spread most rapidly during April –dented activity in vulnerable notable sectors of the Ontario economy. That province accounted for the entire national employment decline, as hospital ward closures and empty restaurants produced sizeable job declines in health care and accommodation/food service respectively,” says CIBC World Markets. “Another industry on the front lines –transportation/warehousing — also suffered a monthly jobs decline, with further damage likely in store as airlines reduce headcount in the wake of a tourism dropoff.”

BMO Nesbitt Burns points out that the report is not quite as weak as the headline would first indicate, since the entire decline was in part-time jobs (-29,400), while full-time employment rose 10,700. And, it says the damage from SARS should prove temporary.

“Outside of the directly affected industries, job losses were fairly evenly spread, with the softening manufacturing sector down for the sixth time in eight months, but even construction and overall services were off as well. There was some strength in finance & real estate, retail trade, and government. Manufacturing will remain a weak spot, especially with the loonie on a roll,” says BMO. CIBC agrees that it would be wrong to blame all the weakness on SARS.

“What likely contributed to the job losses in April in non-SARS related industries was the Iraq effect and the impact upon the U.S. economy,” says RBC Financial. “The lifting of SARS, the removal of the one-off effect of Good Friday on the survey methodology, and the Iraq effect should all point to better future news on Canadian employment trends albeit at a much slower pace than the growth witnessed last year.”

Still, economists now expect the Bank of Canada to lay off its tightening stance over the summer. “Today’s report does suggest that Canada’s labour market is gearing down, which is certainly consistent with our call that the Bank of Canada will put its policy settings on hold during the summer months. And, although the high-flying loonie is still benefiting from a strong tail wind, it may see its wings clipped a bit by this morning’s weaker-than-expected employment tally,” says TD Bank.

CIBC said that the report also provides further evidence of fading wage pressures. And, BMO adds, “The pullback in employment is probably not the start of a major weakening trend in job growth, but it is a clear signal that the record gains of last year are long over. This report will make the Bank of Canada quite comfortable holding steady on June 3rd.”