Canada’s Unemployment Rate Remains Unchanged at 6.4%, Suffers 2800 Job Loss. Photo Credit: Sean Kilpatrick/The Canadian Press
Canada's job market showed signs of further weakening in July, with the economy losing 2,800 jobs and the unemployment rate remaining steady at 6.4 percent, according to Statistics Canada.
The July report suggests that the job market is struggling, potentially influencing the Bank of Canada to consider additional interest rate cuts. Earlier in July, the Bank had reduced its key interest rate by 0.25 percentage points, reflecting growing concerns about sluggish economic growth and inflation falling short of targets due to persistently high interest rates.
Despite this, average hourly wage growth eased slightly to 5.2 percent from 5.4 percent in June, which, according to Douglas Porter, an economist at BMO, remains too high for the Bank's comfort.
The job figures for July were weaker than economists had anticipated. Forecasts had predicted a rise of 15,000 to 30,000 jobs, but the actual decrease was a disappointment. The jobless rate was expected to edge up to 6.5 percent but stayed unchanged.
Leslie Preston, an economist at TD Bank, noted that job growth has not kept pace with the expanding labor force, which has increased by 2.8 percent over the past year, while employment grew by only 1.7 percent. The decrease in the number of people in the labor force in July might explain why the unemployment rate remained flat. Statistics Canada observed that tougher job prospects for younger workers might be causing some to stop job hunting altogether.
Although the overall economic growth has been slow, Preston emphasized that there are no major alarm signals about Canada's economy at the moment.
The unemployment rate has risen gradually from 5.5 percent a year ago to 6.4 percent in July. In terms of employment types, there was a rise in full-time jobs offset by a decline in part-time work, reversing a previous trend.
The private sector saw a reduction of 42,000 jobs, while the public sector added 41,000 positions, primarily in healthcare and social assistance.
Younger workers and newcomers continue to face challenges, with the unemployment rate for those aged 15 to 24 reaching 14.2 percent in July, the highest level since September 2012, excluding the pandemic period. Recent immigrant youth faced an even higher unemployment rate of 22.8 percent.
Brendon Bernard from Indeed noted a significant divide in the labor market, with youth employment rates lagging behind those of older age groups, whose employment rates are still above pre-pandemic averages.
Economists Abbey Xu from RBC and Leslie Preston anticipate that the overall unemployment rate could peak at 6.7 percent by the end of the year. Money markets had almost fully priced in another 0.25 percentage point rate cut by the Bank of Canada in September, a view shared by economists.
Xu expects the economy to slow further but does not foresee a full-blown recession unless there is a substantial deterioration in the labor market. Recent softer job data from the U.S. contributed to a significant stock market selloff last week, although many economists regard this as an overreaction rather than a sign of imminent recession.
