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Canada’s unemployment rate jumped to 6.6 per cent in August, Statistics Canada said on Friday, more than economists expected as the labour market added a net 22,100 jobs largely in part-time work.
The unemployment rate is now at its the highest level since May 2017, outside of the COVID-19 pandemic, as job growth has failed to keep up with a surge in Canada’s population. Statistics Canada noted that the unemployment rate has “generally trended up” since April 2023, rising 1.5 percentage points in that time.
Economists polled by Reuters had expected the economy to add 25,000 jobs, and the August unemployment rate to rise to 6.5 per cent.
The increase in jobs were driven by part-time work, which offset a decline in full-time employment. Statistics Canada said a net 65,700 part-time jobs were added in August, while full-time jobs declined by a net 43,600. Average hourly wages, closely watched by the Bank of Canada, increased 5 per cent year-over-year in August, after increasing 5.2 per cent in July.
The Bank of Canada cut its benchmark interest rate for the third consecutive time this week, leaving the door open to further, and potentially deeper, cuts amid economic weakness. Markets are fully pricing in another 25 basis point cut in October and in December, according to Reuters.
“Overall, this was a slightly softer than expected report consistent with continued steady interest rate cuts from the Bank of Canada,” CIBC economist Andrew Grantham wrote in a research note.
Desjardins managing director and head of macro strategy Royce Mendes said in a research note that the employment data suggest that the economy continued to stagnate in the third quarter.
“The Bank of Canada had predicted a sharp rebound for the economy in the third quarter, but so far that projection isn’t materializing,” Mendes wrote.
“We continue to see a significant chance that central bankers will need to lower the policy rate in October by 50 basis points to avoid falling behind the curve. That said, with much data still to be released between now and then, it’s too early to change our official call.”
Statistics Canada noted that this was a difficult summer for students seeking employment. On average, the unemployment rate for returning students between the ages of 15 and 24 was 16.7 per cent this summer, up from 12.9 per cent. The data agency said the unemployment rate between May and August for students was the highest since 2012, excluding the COVID-19 pandemic.
Among those who were unemployed in July, 16.7 per cent found work in August, lower than last year, when 23.2 per cent found employment. Statistics Canada noted that this is “an indication that unemployed people may be facing greater difficulties finding work.”
More to come.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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