Canada experienced a setback in its labor market as the economy shed 84,000 jobs in February, causing the unemployment rate to climb to 6.7%, according to Statistics Canada. This decline, one of the most significant job losses observed in recent years outside of the pandemic, was mainly driven by decreases in full-time and private sector positions, offsetting previous growth seen in the fall. Industries like wholesale and retail trade, construction, and manufacturing saw notable job losses. Men aged 25 to 54 and young individuals aged 15 to 24 were particularly affected by this downturn.
Key indicators remained relatively stable compared to the previous year, including the unemployment rate, the employment rate, and the number of people working either full-time or part-time. However, the participation rate dropped slightly to 64.9% in February. On the bright side, average hourly wages increased by 3.9% to $37.56 per hour compared to the same period last year.
Katherine Judge, executive director and senior economist at CIBC Capital Markets, expressed concern over the labor market’s negative turn in February, emphasizing the loss of full-time and private sector roles. Analysts had anticipated a gain of 10,000 jobs and a slower rise in the unemployment rate, making this report worrisome for the Bank of Canada due to increased labor market slack and trade uncertainties affecting economic activity.
The rise in the unemployment rate or its stagnation was witnessed in nine out of the 13 provinces and territories last month. Youth unemployment for individuals aged 15 to 24 reached 14.1%, posing challenges for this demographic over the past two years. Racialized youth faced notably higher unemployment rates compared to their non-racialized, non-Indigenous counterparts.
Douglas Porter, chief economist at the Bank of Montreal, highlighted the weak job market performance over the last year, signaling minimal job growth and an overall negative impact on the economy. This weaker economic outlook should deter any discussions of interest rate hikes, with Porter suggesting that the Bank of Canada might need to consider rate cuts if economic weakness persists. The combination of factors such as consumer income constraints from rising oil prices, USMCA uncertainties, and stagnant job growth could prompt a shift towards rate cuts rather than hikes in the current economic climate.
