Statistics Canada released a report on Friday that showed Canadian unemployment at 6.9%, its highest level since last November. This is because US tariffs began to affect the important parts of the Canadian economy dependent on trade and manufacturing.
As trade tensions increase, the economy is showing signs of stress. The rise in unemployment shows that.
In April, the number of unemployed people increased by 39,000. This is a 2,6% rise over last month and an 14% increase compared to a year earlier.
After a decline of 32.600 jobs in March, the headline employment number showed a modest increase of 7,400 net positions in April.
Analysts had predicted 2,500 additional positions, but the modest growth fell short.
In April, the unemployment rate was equal to the reading from November 2024. This is the highest level since the COVID-19 pandemic in eight years.
These results suggest that recent US tariffs are eroding Canada’s ability to adapt its labour market.
The manufacturing industry is hit
In April, the industrial sector shrank sharply and lost 31,000 jobs. Statistics Canada attributes much of the reduction in employment to US tariffs that have created significant uncertainty among businesses who rely on trans-border trade.
The retail and wholesale industries also lost jobs, showing that tariffs’ effects are not limited to heavy industry.
The unemployment rate (which measures the percentage of people in working age who are employed) dropped to 60.8%. This is a new six-month-low.
Indicator has suffered during the years 2023-2024 due to population growth outpacing job creation.
While the population has grown slower since February, there is still a long way to go before employment levels are back up.
Hiring in the public sector was one of few bright spots. In April, employment in this area grew by 23,000 thanks to the temporary hiring for federal elections.
The growth, however, was not enough to compensate for losses in other parts of the economy.
The labour market is experiencing a heightened level of friction
Job market chaos seemed to be increasing. The job market appeared to be more chaotic.
According to the survey, Canadians who were looking for work in April had longer periods of unemployment because conditions on the labour market worsened. This indicates a cooling tendency.
The Bank of Canada uses the average hourly wage for permanent employees to assess wage growth and its potential contribution to inflation.
This kind of wage increase will likely do little to calm fears about a softening of the labour market.
The markets are preparing for a June rate reduction
The financial markets have increased expectations of Bank of Canada monetary ease in response to the Labour Report.
The currency swap market’s bets indicate that there is a 50% chance of a drop in the rate by 25 basis points at June’s central bank meeting.
After the Labour Market Report, the yield on two-year Canadian Government Bonds dropped 3.3 basis points, to 2,586%. The Canadian dollar rose a little, and is now trading at 1,3909 cents to the US Dollar (71.90cents).
Bank of Canada warned that falling exports, rising prices and poor hiring prospects could require decisive actions.
The policymakers are more inclined to offer short-term help to boost a weakened economy as trade issues worsen.
As new information becomes available, the post Canada’s unemployment rates hits 6.9% due to US tariffs that undermine export industries may be updated.
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