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 suffered its steepest setback of the year in August, shedding a net 65,500 jobs and pushing the unemployment rate up to 7.1 per cent, Statistics Canada said Friday. The unexpected drop marks the highest unemployment level since 2016 outside of the pandemic.
The August jobs report provides “the clearest signal that the job market has stalled,” Indeed Canada senior economist Brendon Bernard says. That weakness, economists say, strengthens the case for rate cuts by the Bank of Canada (BoC), though they disagree on how far and how fast the central bank will move.
Desjardins Group economist Royce Mendes describes the “ugly employment numbers” as solidifying the case for the BoC to act. Desjardins expects a quarter-point cut on September 17 and further reductions to bring the policy rate down to two per cent from 2.75 per cent “to stem the bleeding in the economy.”
CIBC’s Andrew Grantham made a similar call for easing, writing that the “further slump” in jobs should result in a September cut, “with another to follow in Q4.”
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.”
RBC, which for months has had a base case of no further interest rate cuts, acknowledges that the August jobs data have increased the odds. Echoing BMO’s Porter, economist Claire Fan writes that the CPI data will “bear an unusual amount of weight as a deciding factor.”
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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