High interest rates and unemployment: Expectations for June’s rate announcement

Meanwhile, Canada’s rise in unemployment comes as high borrowing costs weigh on businesses and strong population growth continues to add to the country’s labour supply. The unemployment rate was up one percentage point compared with a year ago.

“The problem is that we got a slight decline in employment at a time when the population is still increasing, very, very quickly. And that was the main cause of concern within this report,” Grantham later said in an interview.

Canada’s jobless rate and unemployment stats

Statistics Canada says the rise in the jobless rate was driven by an increase of 60,000 people searching for work or temporarily laid off. The total number of unemployed people in the country stood at 1.3 million last month, an increase of nearly 250,000 compared with a year ago.

Young people are particularly feeling the chill in the labour market. Employment among those aged 15 to 24 declined by 28,000 in March and the jobless rate for the group rose to 12.6%, the highest it’s been since September 2016 outside of pandemic years 2020 and 2021. An RBC report released in January said students and new graduates, rather than new arrivals to Canada, are driving the increase in unemployment in the country. (Here are the best jobs in Canada for immigrants.)

“Close to half of the increase in the total number of unemployed people year-over-year in Canada… were students that were not in the job market and have started looking for work,” Janzen said.

Friday’s report shows job losses last month were concentrated in accommodation and food services, followed by wholesale and retail trade and professional, and scientific and technical services. Meanwhile, employment increased in four industries, led by healthcare and social assistance.

Despite weaker labour market conditions, wage growth continued to grow rapidly, with average hourly wages rising 5.1% annually.

Although economists are gearing up for rate cuts in the coming months, the job market is expected to remain weak for a while.
Janzen expects the unemployment rate to peak at 6.5% in the third quarter of the year, noting interest rates will continue to restrict growth until they return to normal levels.