Job Growth Stalls in Canada; Unemployment Rate Holds at 6.4%

Canada unexpectedly shed jobs for a second straight month and the unemployment rate held at the highest level in more than two years، keeping the Bank of Canada on track to further cut interest rates.

The country lost 2،800 positions in July، while the unemployment rate was unchanged at 6.4%، Statistics Canada reported Friday in Ottawa. Economists in a Bloomberg survey had expected the economy to add 25،000 positions and the jobless rate to rise to 6.5%.

Wage growth for permanent employees decelerated to 5.2% from 5.6% a month earlier، though it remained faster than expectations of 4.8%.

Churning out jobs

Combined، the data point to an economy that’s struggling to churn out jobs، and while the unemployment rate didn’t rise as expected، it’s still 1.4 percentage points higher than in January of last year. The report adds to evidence that Canada’s job market is on track to loosen gradually، preserving a soft landing without a sharp spike in unemployment so far.

Following the release of the data، the Canada two-year government bond yield initially spiked to 3.36% before quickly paring back to 3.328% as of 8:40 a.m. Ottawa time. The loonie held to losses after the report، trading at C$1.375 per US dollar.

Policymakers led by Governor Tiff Macklem reduced the policy rate by 25 basis points for a second straight meeting in July. During their deliberations last month، some officials said they’re worried that a further deterioration in the job market may delay a recovery in consumer spending and put downward pressure on growth.

This is the only jobs report before the next Bank of Canada rate decision on Sept. 4. Most economists expect cuts at each of the remaining three meetings this year، which aligns with market pricing. 

The report shows that the labor market remains weak، said Charles St-Arnaud، chief economist at Alberta Central، in an email.

“While the strong increase in full-time jobs is a positive by pushing hours worked higher، most of the job creation looks to be once again in the public sector. This suggests that economic activity remains weak in the private sector. In addition، the details shows the labour market deteriorated more for the younger cohorts،” he said.

The youth unemployment rate surged in July، rising 0.7 percentage points to 14.2%، the highest level since September 2012 outside the pandemic.

Total hours worked rose 1.9% from a year ago and were up 1% on the month.

The participation rate fell to 65%، as the labor force fell by 11،300، the first decline since September 2022.

The employment rate — the proportion of the working-age population that’s employed — fell 0.2 percentage point to 60.9%.

Job losses were led by decreases by retail and wholesale trade، as well as the financial sector، which shed 44،100 and 15،000 positions respectively. Public administration hiring rose 20،000.

Regionally، British Columbia led job losses، and Ontario and Saskatchewan were the only provinces to add to employment.