The Canadian economy unexpectedly lost 7,000 jobs in February, giving little reason for the Bank of Canada to change its neutral stance on interest rates after strong hiring in January had raised hopes of renewed vigor in the labor market.

Statistics Canada’s employment report, released on Friday, was mixed, showing 18,900 full-time jobs were created in the month while 25,900 part-time positions disappeared. The private sector hired 35,200 new workers while the public sector shed 50,700. The services sector was hardest hit.

The unemployment rate held steady at 7.0 percent.

Analysts had forecast 15,000 new positions in the month, following a gain of 29,400 in January and a loss of 44,000 jobs in December.

A separate report by Statscan on Friday showed the country’s trade deficit narrowed more than expected in January to C$177 million ($161 million) from C$922 million in December. The December figure was revised down from C$1.66 billion previously.

Forecasters had predicted the trade gap would be C$1.22 billion.

The Canadian dollar weakened to a session low against the U.S. dollar after the data but investors were also taking in a U.S. report showing an acceleration of jobs growth, with employers adding 175,000 workers to their payrolls.

Economists cautioned against over reacting to the headline number on job losses, pointing out some of the more upbeat details of the report.

“I think the bigger picture here is the North American economy is still chugging ahead and I wouldn’t read too much into a negative print on the headline number in Canada,” said Doug Porter, chief economist at BMO Capital Markets.

The monthly job numbers are based on a household survey and are very volatile from month to month. Analysts prefer to look at the six-month trend, which shows the average monthly job gain was 4,200 in the six months to February versus 15,300 in the six months to January.

Mark Chandler, strategist at the Royal Bank of Canada, did not see the Bank of Canada reacting much to the job numbers.

“I think the Bank of Canada would look at this number and say the underlying trend is not bad,” he said.

Canada’s economy outperformed that of the United States in recovering quickly from the 2008-09 recession, but growth has been sluggish as exports and business investment have failed to bounce back as expected.

The Bank of Canada has kept its main interest rate unchanged at 1.0 percent for over three years and this week reiterated its guidance that the next move could be either a rate hike or a cut.

Loonie Weakens

The Canadian dollar weakened to a session low against the U.S. dollar after the Canadian data but investors were also taking in more upbeat U.S payrolls data.

The Canadian dollar was at C$1.1055 to the greenback, or 90.46 U.S. cents, weaker than Thursday’s close of C$1.0992, or 90.98 U.S. cents. The loonie hit a session low of C$1.1064 shortly after the data was released.

Most of the employment setbacks were in the services sector. Employment in health care and social assistance fell by 27,500 in the month, and 24,600 workers in finance, insurance, real estate and leasing lost their jobs in the month.

The biggest employment creation took place in the “other services” category, which includes personal care services and civic and social organizations, which added 9,800 workers. The natural resources and agricultural industries hired 9,800 and 7,900 employees, respectively.

Wages for permanent employees rose 2.7 percent in the year to February, unchanged from January and well above the inflation rate.

Trade Deficit Narrows

The trade figures released on Friday were a pleasant surprise for markets, with the gap narrowing more than expected.

Exports edged up 0.2 percent for the month, largely due to strong prices for commodities such as crude oil, bitumen and natural gas. The overall prices for exports jumped 5.8 percent while volumes fell 5.3 percent.

Imports declined 1.6 percent, pulled lower by weak auto and energy product shipments.

The country’s trade surplus with the United States, by far its top trading partner, widened to C$3.62 billion in January from C$3.17 billion in December.

In a third data series, Statscan also said labor productivity in Canadian businesses rose by a higher-than-expected 1.0 percent in the fourth quarter of last year, the biggest gain since the first quarter of 2010 and surpassing the U.S. productivity gain of 0.7 percent in the same period. (Reuters)