Canada’s Unemployment Hits 9-Year High

By Promit Mukherjee
OTTAWA (Reuters) – Canada had almost 1.6 million people unemployed in August, as the economy lost thousands of jobs, pushing the unemployment rate to a nine-year peak barring the pandemic years.

Data released on Friday showed that the unemployment rate rose by 0.2 percentage points in August to 7.1%, the highest level since May 2016, if the pandemic years of 2020 and 2021 are excluded, according to StatsCan.

The economy shed 65,500 jobs in August, primarily in part-time work, driven by decreased hiring and some layoffs, with the layoff rate rising to 1%, compared to 0.9% a year earlier.

Despite recent resilience against U.S. tariffs on steel, aluminum, and cars, labor data indicates that these import taxes are affecting other sectors adversely.

Analysts had predicted a net job gain of 10,000, with the unemployment rate expected to rise to 7% from 6.9% in July. The job losses in August marked the worst level since January 2022.

Following the jobs data, money markets estimated a 92% chance of a rate cut on September 17, up from 72% previously. Doug Porter, Chief Economist at BMO Capital Markets, stated, “This reinforces that the economy is grappling with trade uncertainties.”

Post-data, the Canadian dollar strengthened due to declines in the U.S. dollar, and yields on two-year government bonds fell by 5.6 basis points to 2.569%.

The employment rate dropped to its lowest level since the pandemic at 60.5% in August. The participation rate, indicating the number of economically active individuals, also fell to 65.1%, the lowest since the pandemic.

Ongoing uncertainty regarding U.S. trade policy has led to cautious hiring and investment among Canadian businesses, adversely affecting the job market and economic growth. Job losses were particularly steep in the auto manufacturing and steel sectors.

The transportation and warehousing sectors lost 22,700 jobs, while manufacturing saw a decline of 19,200. However, the services sector experienced substantial job losses, with net reductions of 67,200 jobs, including a loss of 26,100 in professional, scientific, and technical services.

Job gains of approximately 17,100 were mostly seen in the construction sector, which has also been affected by tariffs.

The average hourly wage for permanent employees rose by 3.6% to C$37.81 per hour in August, compared to a 3.5% increase the previous month, reflecting inflationary trends closely watched by the Bank of Canada.