Canadian unemployment rose to 6.9% in April, the highest level since November, as US tariffs on major exports started hitting the country’s important manufacturing and trade-dependent parts of the economy, Statistics Canada reported on Friday.
The increase in unemployment, with roughly 1.6 million Canadians out of work, shows mounting hurdles in an economy that is already showing symptoms of strain as trade tensions escalate.
The number of unemployed persons rose by 39,000 in April alone, a 2.6% increase over the previous month and 14% more than a year ago.
The headline employment figure indicated a modest growth of only 7,400 net jobs in April, after a loss of 32,600 posts in March.
The modest increase fell slightly short of analyst forecasts, which were for 2,500 new positions.
The unemployment rate in April matched the November 2024 reading, which was the greatest level outside of the COVID-19 pandemic era in the previous eight years.
The results imply that the United States’ most recent wave of tariffs, which included levies on Canadian steel and aluminium in March and broader taxes on vehicles and other commodities in April, is eroding Canada’s labour market resiliency.
Manufacturing takes the hit
The industrial sector contracted sharply in April, shedding 31,000 jobs. Statistics Canada ascribed much of this reduction to the impact of US tariffs, which have caused significant uncertainty for businesses that rely on cross-border trade.
Retail and wholesale trade also saw job losses, indicating that the consequences of the tariffs are spreading beyond heavy industry.
The employment rate, which measures the proportion of the working-age population that is employed, dropped to 60.8%, a six-month low.
The indicator has been under pressure during 2023 and early 2024, with population growth frequently outpacing employment creation.
Notably, while population growth has slowed since February, employment increases have yet to recover.
The public sector hiring was a rare bright spot. Employment in that area increased by 23,000 in April, thanks in part to temporary recruitment for the federal election.
Nonetheless, the growth was insufficient to offset losses elsewhere in the economy.
Labour market frictions intensify
The job market appeared to become more chaotic. In April, 61% of those who were unemployed in March remained unemployed, which is nearly four points higher than the previous year.
In April, Canadians looking for work had lengthier periods of unemployment due to worsening labour market circumstances, indicating a cooling trend, according to the survey.
Average hourly wage growth for permanent employees remained at 3.5 per cent in April, a key input that the Bank of Canada looks at when assessing wage growth as a potential contributor to inflation.
But this kind of stable wage gain will probably do little to ease fears of a softening labour market.
Markets prepare for June rate cut
Financial markets reacted to the labour report by increasing expectations of monetary easing from the Bank of Canada.
Currency swap market bets now indicate a 55% possibility of a 25 basis point drop at the central bank’s June meeting.
Following the labour market report, two-year Canadian government bond yields decreased 3.3 basis points to 2.586%, while the Canadian currency rose slightly, trading at 1.3909 to the US dollar (71.90 cents).
The Bank of Canada has cautioned that declining exports, increasing prices, and weak hiring prospects may necessitate decisive action.
As trade problems worsen and layoffs increase, policymakers appear more likely to provide short-term assistance to bolster a weakening economy.
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