Canada’s unemployment rate ticked up to 5.8 per cent last month, as high interest rates weigh on job creation at a time when the country’s population is growing rapidly.
Statistics Canada released its November labour force survey Friday, showing the economy added a modest 25,000 jobs, slightly surpassing forecasters’ expectations.
Manufacturing and construction saw the largest gains in employment, while the most jobs were shed in wholesale and retail trade as well as finance, insurance, real estate, rental and leasing.
The unemployment rate was 5.7 per cent in October.
After the labour market experienced a strong bounce back from the pandemic, the unemployment rate has been on an upward trend since April as the Canadian economy shows clearer signs of weakness.
Real gross domestic product – which measures the size of the economy – has been struggling to consistently grow over the last year. The most recent GDP report showed the economy shrank 1.1 per cent on an annualized basis in the third quarter.
“Partially echoing yesterday’s GDP report, Canada’s economy is hanging in, but the clear softening in the labour market is consistent with continued soft growth,” Benjamin Reitzes, BMO’s managing director of Canadian rates and macro strategist, wrote in a client note.
“While the headline (employment) increase was better than expected, the ongoing increase in the unemployment rate is the bigger story, and likely better reflects the state of the economy.”
Canada’s unemployment rate is now hovering around pre-pandemic levels but is expected to continue rising as higher borrowing rates weigh on businesses.
The weaker job market also means more workers are finding themselves unemployed due to layoffs. Friday’s report says unemployed people last month were more likely to have been laid off compared with a year ago.
Despite those trends, however, average hourly wages continued to grow quickly – rising 4.8 per cent from a year ago – as workers seek compensation for the recent runup in inflation.
The Bank of Canada is set to announce its next interest rate decision on Wednesday, as forecasters widely believe the central bank is done raising rates.
Its key interest rate currently sits at five per cent, the highest it’s been since 2001.
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