Canada’s unemployment rate rose to 6.9% in April, its highest level since November, as the manufacturing sector suffered under mounting pressure from US tariffs, Statistics Canada said on Friday.
The jobless rate climbed from 6.7% in March, surpassing economists’ expectations for a 6.8% reading.
While the economy added 7,400 jobs last month — above forecasts for a gain of 2,500 positions — the modest increase was not enough to keep pace with Canada’s growing population.
Bank of America said the report reflects a continued softening in the labor market and supports the case for further interest rate cuts by the Bank of Canada later this year.
“The weakness in the economy is noticeable in private sector job creation, as it has contracted for two months in a row,” BofA economists wrote in a note, pointing to a 26,800-job decline in private employment in April. Public sector hiring rose by 22,900 jobs, and self-employment increased by 11,200.
Full-time employment drove the net gains with an increase of 31,500 jobs, but that was partially offset by a drop of 24,200 part-time positions. The employment rate edged down to 60.8% from 60.9% in March.
Manufacturing was hit particularly hard, losing 30,600 jobs in April, accounting for nearly all of the 33,000-job decline in the goods-producing sector. Bank of America said the losses signaled “a deepening of the negative shock coming from the trade war with the U.S.”
Meanwhile, the services-producing sector added 40,300 positions, led by a 37,100-job increase in public administration. However, trade-related industries lost 26,800 jobs.
The 6.9% unemployment rate matches a post-pandemic high seen last November and had not reached that level previously since January 2017.
Statistics Canada said the rise in the jobless rate was due to a 2.6% month-over-month increase in the number of unemployed people, combined with only a 0.2% rise in the labor force.
Despite the labor market’s recent weakness, wage growth held steady. Average hourly wages rose 3.5% year-over-year in April, in line with March and slightly above economists’ expectations.
Bank of America expects the Bank of Canada to cut its policy rate by 25 basis points at each of its final three meetings this year, bringing the benchmark rate to 2.00% by December. However, the central bank may wait for more clarity on inflation and the economic fallout from the ongoing trade conflict.
“Despite the mounting evidence of a deceleration in activity, core inflation is close to 3.0%, and an increase in inflation expectations due to retaliatory tariffs could reignite price pressures,” BofA said. “We believe the BoC will choose to support the economy once inflation is under control.”