Canada's Unemployment Rate Hits 7% as Trade War Impacts Labor Market

Canada's labor market experienced a modest increase in employment in May, with only 8,800 new jobs added. This figure slightly exceeded the expected 5,000 new jobs, but it was not enough to offset the ongoing challenges in the labor market. The unemployment rate rose to 7%, marking the highest level since September 2016, excluding the pandemic period. This increase in unemployment rate was driven by a net loss of 15,300 jobs since February, as businesses responded to tariffs imposed by the United States on Canadian automotive, steel, aluminum, and other industries.

The labor market has been struggling for the past four months, with employment either remaining stagnant or decreasing. The net loss of jobs since February has been a significant setback, and the unemployment rate has increased by 0.4 percentage points during this period. The report highlights the weakness in the labor market due to the trade war, which has led to businesses slowing hiring, reducing their scale, or laying off workers.

Canada's economy needs to create approximately 30,000 jobs per month to keep pace with population growth and maintain a stable unemployment rate. However, the current labor market conditions suggest that this target may not be met in the near future. Economists predict that the unemployment rate will rise further to 7.2% in the second half of the year, as the impact of the trade war continues to be felt.

The increase in full-time employment by 58,000 positions was offset by a decrease in part-time employment by 49,000. This shift in employment patterns may reflect the challenges faced by businesses in the current economic climate, as they struggle to maintain their operations and adapt to the changing market conditions. The number of unemployed individuals reached 1.6 million, an increase of nearly 14% compared to the same period last year. This highlights the ongoing challenges in the labor market and the need for policies to support job creation and economic growth.