MNI: Canada Jobless Rate Highest Since 2016 Excluding Covid

Canada's jobless rate reached the highest since 2016 excluding the pandemic as the labor force continued to grow faster than employment, which grew in May on full-time positions even as U.S. tariffs took hold.

Unemployment rose a notch to 7% to mark the third straight increase, Statistics Canada said Friday from Ottawa. Employment rose by 8,800, a mix of 57,700 more full-time jobs and a decline of 48,800 part-time reflecting the end of temporary positions for the April 28 federal election. Economists predicted the rise in unemployment but saw a decline of 15,000 jobs in May. 

The Bank of Canada mainly tracks the job market as an indicator of slack and unemployment has climbed 0.7 percentage points over the last year, one reason it led the G7 with seven interest-rate cuts between last June and March. Governor Tiff Macklem held the key lending rate at 2.75% for a second meeting on Wednesday saying he can move again if the U.S. trade war does more damage and inflation remains under control. 

Assessing balance in the job market is clouded by the government's move to curb record immigration that pushed labor supply ahead of demand, partly because it's unclear exactly when population growth will level off. Growth in full-time work suggests continued willingness to hire even as many economists see Canada going into a recession this quarter. Resiliency is in line with BOC comments the economy has weakened but not substantially in the face of Donald Trump's threats of using economic force to make Canada the 51st State. 

The Bank in April laid out two scenarios based on the trade war's intensity, where GDP stalls or contracts this quarter. The Labour Force Survey showed hours worked, which economists see as a proxy for output, were unchanged in May but rose 0.9% from 12 months earlier. Average wage growth was also steady at 3.4%. 

U.S. tariffs are hitting edges of the job market. Youth unemployment is comparable to the highest since 2009 at 20%, up about 3% from a year earlier, StatsCan said. By city unemployment is highest in the Ontario auto factory hubs of Windsor and Oshawa at 10.8% and 9.1%, respectively. Nationwide factory employment declined by 12,200, which wasn’t one of the leading dips on the month.

Another mixed part of the report was private-sector employment showing a healthy rise for the first time since January, taking over from a long spell where demand was led by government positions.