Employment fell for both core-aged men and women in August, with steeper declines for men. (Photo by J. Countess/Getty Images) · J. Countess via Getty Images
Canada’s labour market shed a net 65,500 jobs in August and the unemployment rate jumped to 7.1 per cent, according to Statistics Canada data released on Friday.
The unemployment rate is now at its highest point outside of the pandemic since May 2016, and has risen 0.5 percentage points since the start of this year.
Economists’ generally agreed that the report increases the odds of the Bank of Canada (BoC) cutting interest rates, but differed on their forecasts around the timing and depth of cuts.
In a note published following the data release, Desjardins Group economist Royce Mendes said the “ugly employment numbers” should persuade more observers that the BoC needs to reduce interest rates sooner rather than later. Desjardins expects a 25 basis point cut at the BoC announcement on September 17 and further cuts to bring the rate down to 2.0 per cent from the current 2.75 per cent “to stem the bleeding in the economy.”
BMO chief economist Douglas Porter acknowledged the “weak” report but argued that the details “were not quite as dire as the headline results.” Hours worked went up slightly, he noted, and could be positive for the quarter, “suggesting that the economy may still have ground out a tiny gain in Q3.”
“All told, this weak report fully reinforces any bias for the BoC to ease somewhat further here, but inflation hasn’t quite given them the all-clear,” Porter wrote. “The upcoming CPI report (on Sep. 16) lands a day ahead of the next BoC meeting, and it looms large.”
CIBC Economist Andrew Grantham wrote that the “further slump” in employment should result in a September cut, “with another to follow in Q4.”
Economists had expected the Canadian economy to add 10,000 jobs in August and the unemployment rate to rise to 7.0 per cent, according to consensus estimates published by the Bank of Montreal.
Statistics Canada noted the layoff rate was 1 per cent, up from 0.9 per cent a year earlier, and only 15.2 per cent of those seeking work in July had found a job in August, a proportion significantly lower than the pre-pandemic average of 23.3 per cent from 2017 to 2019.
The job losses were largely in part-time work, with a net decrease of 60,000 positions. Full-time employment, which had recorded a loss of over 50,000 jobs the month before, was little changed. Jobs for youth were similarly steady following a major drop in July, but positions for core-aged (25-54 years old) men and women fell a net 58,000 and 35,000 respectively.
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Mendes said the job losses had affected industries regardless of their exposure to international trade uncertainty.
“Weakness which was previously isolated in highly trade-dependent sectors now appears to be spreading across the economy, a risk we had flagged when the Bank of Canada moved to the sidelines earlier this year,” he wrote. “Importantly, the prime-age unemployment rate, which captures households with the largest mortgage balances, rose three ticks to 6.1 per cent, also the highest since 2016 aside from the pandemic.”
Losses were distributed across several industries, with the sharpest declines in professional, scientific and technical services (-26,000), transportation and warehousing (-23,000), and manufacturing (-19,000). Construction was an exception, adding 17,000 positions.
By province, Ontario (-26,000), British Columbia (-16,000) and Alberta (-14,000) recorded the biggest drops, with Alberta’s unemployment rate jumping to 8.4 per cent, its highest outside the pandemic since 2017.
The employment rate fell to 60.5 per cent in August, continuing a slide that began in January. Average hourly wages grew 3.2 per cent year-over-year, easing slightly from a 3.3 per cent gain in July.
The youth unemployment rate remained elevated at 14.5 per cent, while the summer jobless rate for students hit 17.9 per cent, the worst since 2009 excluding the pandemic.
Indeed’s Brendon Bernard said the trade war has delivered a “shock to the system” that is increasingly evident in labour markets, pointing to Windsor as one region where unemployment has jumped. But he noted that “other challenges facing the Canadian labour market – like the difficulty of finding new work among those unemployed – have continued to build off of last year’s trends.”
In July, Canada lost 41,000 jobs, with losses highest among those aged 15-24. The unemployment rate held at 6.9 per cent, largely because the proportion of people working or actively seeking employment declined.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.
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