Canada’s jobs report finally failed to surprise economists with its strength, as jobs disappeared and the jobless rate jumped, pushing analysts to call for a 50 basis point rate cut from the Bank of Canada next week.

Canadian employment fell by a greater-than-expected 17,900 in December. This loss, combined with a large increase in the labour force, pushed the unemployment rate up to 8.%, its highest level since the spring of 1999.

“This is bound to make for some ugly headlines,” predicts BMO Nesbitt Burns, noting, “The details of the report were also discouraging. Full-time jobs dropped by 11,200, the third straight decline. Part-time jobs also fell, but hardly made a dent to recent gains. Manufacturing fell again, although the setback was not nearly as sharp as in the two prior months. Retail & wholesale trade were also weak. Rare bright spots were found in construction, which is no surprise in view of the balmy weather, and the public sector.”

“The recession is finally catching up to the Canadian jobs market, which to this point had largely meant cuts in working hours rather than outright employment declines. No longer,” declares CIBC World Markets. “Economists will use the fine print to explain away some of the bad news, but the 8% unemployment rate will no doubt put more pressure on Ottawa, and particularly the Bank of Canada, to do more to get the economy back in gear.”

“The weakness seen in full-time employment since October, and now in part-time as well, is consistent with evidence of weakness in other sectors of the economy in the fourth quarter and in line with our forecast of a 1% contraction in GDP in Q4,” says Bank of Montreal. “This weaker-than-expected employment report is also consistent with expectations that the Bank of Canada will cut rates next Tuesday. We look for a 25-basis point cut, which will bring the overnight rate to 2.0%.”

BMO’s investment banking cousins at BMO Nesbitt are a bit more aggressive, saying, “On balance, the Bank of Canada is likely to take this as a further sign that the economy continues to wallow and that further rate cuts would be a welcome tonic. A 25 basis point move on Tuesday seems most likely, with a similar move at the meeting in early March. However, given the jump in the jobless rate, the Bank may well front-load all of the expected easing into next week.”

CIBC World Markets expects to see the full 50 bps next week. “With no inflation threat and the risks to consumer confidence from tomorrow’s newspaper headlines on the unemployment rate, we favour a half point cut by the Bank of Canada next week.”