Canada experienced a notable rise in its unemployment rate, nearing levels not seen since 2016, following a loss of 66,000 jobs in August, according to fresh data from Statistics Canada. The unemployment rate climbed by 0.2 percentage points to 7.1%, a level last observed in May 2016, excluding the pandemic years of 2020 and 2021.
Throughout this year, the unemployment rate, which reflects the number of jobless individuals relative to the total labor force, has been consistently increasing from the 6.6% rate registered in January. The majority of the 66,000 lost jobs were in part-time positions, driven by reduced hiring and layoffs, leading to a rise in the layoff rate to 1% in August compared to 0.9% a year earlier.
The latest job losses are more severe than anticipated by some economists, with a Reuters poll forecasting a gain of 10,000 jobs and an unemployment rate increase to 7%. Statistics Canada highlighted that most of the lost jobs, around 60,000, were in part-time roles, while full-time employment showed little change. The losses were primarily concentrated among workers aged 25 to 54, with youth employment remaining relatively stable.
The report, considered grim by Pedro Antunes, Chief Economist at The Conference Board of Canada, indicates a significant impact on the workforce, causing uncertainty and unease. The participation rate, indicating the proportion of individuals economically active, hit 65.1%, marking its lowest point since the pandemic began.
Industries exposed to tariffs bore the brunt of the job losses, with sectors such as transportation, warehousing, and manufacturing experiencing significant declines. Notably, the scientific and technical services sector also shed jobs. Geographically, manufacturing hubs like Windsor and Oshawa in Ontario reported high unemployment rates. The ongoing uncertainty surrounding U.S. trade policy has dampened hiring and investment, affecting economic growth and the job market.
Despite gains in the construction sector, the Chief Economist at BMO Capital Markets, Douglas Porter, noted that the recent report indicates the economy’s vulnerability to trade tensions. The weak report may prompt the Bank of Canada to consider rate cuts, although high inflation remains a factor to watch. Speculation in the markets suggests a high probability of a rate cut following the release of the jobs data.
In the U.S., the labor market also faced challenges, with a rise in unemployment to 4.3%, the highest in four years, and a lower-than-expected job addition of 22,000. Youth unemployment in Canada remained high at 14.5% in August, signaling a tough job market for young individuals. The summer months were particularly challenging for students, with the unemployment rate for those returning to school reaching 17.9%, the highest since 2009.
The employment struggles for youth, exacerbated by the pandemic recovery, are linked to factors such as the rise of gig work, AI, and rapid population growth, impacting job opportunities for Canada’s younger workforce. Desjardins emphasized the need to address these challenges to support the next generation of workers.