By Promit Mukherjee
OTTAWA (Reuters) -Canada had almost 1.6 million people unemployed in August as the economy lost thousands of jobs and its unemployment rate reached a nine-year peak barring the pandemic years, data showed on Friday, pushing up rate cut bets this month to over 92%.
Its unemployment rate rose 0.2 percentage points in August to 7.1%, a level last seen in May 2016 if the COVID-19 years of 2020 and 2021 were excluded, StatsCan said.
The economy shed 65,500 jobs in August, largely in part-time work, it said, adding that this was fueled not only by reduced hiring but also some layoffs, with the layoff rate rising to 1% in August, compared with 0.9% observed 12 months earlier.
Canada’s economy has shown resilience in the last few months in the face of U.S. tariffs on steel, aluminum and cars, but the labor data from Statistics Canada showed that the import taxes are rippling through other sectors.
Analysts polled by Reuters had forecast net job gains of 10,000 and the unemployment rate to edge up to 7% in August from 6.9% in the previous month.
The number of job losses in August reached the worst level since January 2022.
Money markets were betting odds of a rate cut on Sept. 17 at almost 92% after the jobs data, from 72% earlier.
“I think it simply reinforces the point that the economy is struggling with the uncertainty on the trade front,” said Doug Porter, Chief Economist at BMO Capital Markets, who expects a rate cut.
The Canadian dollar was trading strongly after the data due to broad declines in the U.S. dollar. Yields on two-year government bonds fell and were down 5.6 basis points to 2.569%.
The employment rate, or the number of people employed out of the total population, fell to its lowest level since the pandemic to 60.5% in August. A critical metric, called the participation rate, that shows how many people were economically active – in jobs or actively looking for them – was at 65.1%, also the lowest since the pandemic.
Persistent uncertainty around U.S. trade policy has kept Canadian businesses on tenterhooks, leading to minimal hiring and investment, impacting the job market and economic growth, with big job losses in the auto manufacturing and steel sectors.
The brunt of this phenomenon has been on the transportation and manufacturing industries. Transportation and warehousing lost 22,700 jobs and manufacturing lost 19,200 in August, StatsCan said.
But this was surpassed by a loss of 26,100 jobs in professional, scientific and technical services, a category that is a part of the services-producing sector accounting for almost 80% of all jobs in the economy. The services sector shed a net 67,200 jobs.
Porter called the loss in the manufacturing sector “a pretty heavy hit.”
Job gains – around 17,100 – were primarily seen only in construction, a part of the tariff-hit, goods-producing sector.
The average hourly wage of permanent employees – a gauge closely tracked by the Bank of Canada to ascertain inflationary trends – grew by 3.6% in August to C$37.81 per hour, against a 3.5% increase in the prior month.
(Reporting by Promit Mukherjee and Dale Smith; Additional reporting by Anna Mehler Paperny; Editing by Mark Heinrich and Franklin Paul)
Comments