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.
On Friday, data released by Statistics Canada showed its unemployment rate rose 0.2 percentage points in August to 7.1 percent, a level last seen in May 2016 if the COVID-19 years of 2020 and 2021 were excluded.
The economy shed 65,500 jobs in August, largely in part-time work, it said, adding that this was fuelled not only by reduced hiring but also some layoffs, with the layoff rate rising to 1 percent in August, compared with 0.9 percent observed 12 months earlier.
Canada’s economy has shown resilience in the last few months in the face of US tariffs on steel, aluminium and cars, but the labour 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 percent in August from 6.9 percent 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 September 17 at almost 92 percent after the jobs data, from 72 percent 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 US dollar.
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 percent 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 percent, also the lowest since the pandemic.
Persistent uncertainty around US trade policy has kept Canadian businesses on tenterhooks, leading to minimal hiring and investment, affecting 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 percent 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 – about 17,100 – were primarily seen only in construction, a part of the tariff-hit, goods-producing sector.
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