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Canada’s unemployment rate rose to 6.9% in April, the highest since November, as U.S. tariffs started to hit Canada’s export-dependent economy in earnest, data showed on Friday.
The high unemployment rate in Canada, where the number of jobless people is inching towards 1.6 million, was partly a result of U.S. President Donald Trump’s tariffs on a raft of Canadian imports, Statistics Canada said, referring to the jobs shed in the manufacturing sector.
Overall, the employment number was largely flat with minimal gains of net 7,400 jobs in April, it said. This was in contrast to a loss of 32,600 jobs the prior month.
Analysts polled by Reuters had predicted employment to increase by 2,500 people and the unemployment rate to increase to 6.8%. The 6.9% figure matched November unemployment, which was an eight-year high outside of the pandemic era.
Trump’s tariffs on Canadian steel and aluminum in March and automobiles in April, along with import duties on a broad range of products with various reductions and exemptions have impacted businesses and households.
The Bank of Canada has warned that growth would take a major hit in coming months as exports fall, prices increase, hiring reduces and layoffs accelerate. It has vowed to act decisively if the economy needs urgent support.
“Overall, we are seeing a job market that was weak heading into the trade war, now looking like it could soon buckle. Today’s report supports the case for a Bank of Canada cut in June,” said Ali Jaffery, senior economist at CIBC Capital Markets.
BETS ON JUNE RATE CUT
Currency swap market bets show odds of a 25 basis point rate cut in June at over 55% roughly.
The Canadian dollar was trading up 0.1% to 1.3909 U.S. dollar, or 71.90 U.S. cents. Yields on two-year government bonds fell 3.3 basis points to 2.586% after the labor force data was released.
The number of unemployed people, or those looking for work or on temporary layoff, increased by 39,000 or 2.6% in April, and was up by 189,000 or 13.9% on a year-over-year basis.
“People who were unemployed continued to face more difficulties finding work in April than a year earlier,” Statscan said, adding that among those who were unemployed in March, 61% remained unemployed in April which was almost four percentage points higher than the same period last year.
The tariffs and the uncertainty around them especially hit the manufacturing sector which shed 31,000 jobs in the month, Statscan said, adding retail and wholesale trade also saw a drop in the number of employed people.
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The employment rate, or the proportion of the working age population that is employed, was at 60.8% in April, following a decline of 0.2 percentage points in March. This was a six-month low, the statistics agency said.
The employment rate had been depressed for most of 2023 and 2024 as population growth outpaced employment gains. However, since February population growth has not been very high but employment gains have slowed.
Employment in the public sector increased by 23,000 or up 0.5% in April, following three consecutive months of little change, especially due to increased temporary hiring for the federal election.
The average hourly wage growth of permanent employees, a metric closely watched by the Canadian central bank to gauge inflationary trends, was at 3.5% in April, same as March.
(Reporting by Promit Mukherjee; Editing by Dale Smith, Elaine Hardcastle and Sharon Singleton)
