Canada’s unemployment rate rises to 6.2% in May as labor market disappoints job seekers

OTTAWA — Finding work has become increasingly difficult for Canadian job seekers as a weakening economy and high interest rates push business owners to curb hiring.

Statistics Canada’s latest labor force survey on Friday showed the economy added 27,000 jobs last month — too modest a gain to keep the unemployment rate from rising a tenth of a percentage point to 6.2 per cent .

The report, which came largely as forecasters expected, suggests Canada’s labor market is struggling but struggling to meet the needs of a growing number of job seekers.

“The headline numbers returned to a familiar trend: Canadian jobs made a decent overall gain, but didn’t match population growth,” said Brendon Bernard, senior economist with the jobs site.

“And that shows up in a rising unemployment rate, which at 6.2 is no longer particularly low.”

Economists were surprised in April when employment rose by 90,000 – the biggest monthly gain since January 2023.

But May’s employment data suggests the labor market has returned to trend.

“It didn’t take much digging to reveal that this report is considerably softer than the headline, as all the gains were in part-time jobs in one province (Ontario) and the unemployment rate rose to 6.2 percent, as expected,” BMO chief economist Douglas Porter wrote in a client note.

Of those who were unemployed in April, just under a quarter found work the following month, the report said. This is below the pre-pandemic average of 31.5% for the same months in 2017, 2018 and 2019.

“A lower proportion of the unemployed moving into a job may indicate that people are experiencing greater difficulty finding a job in the current labor market,” the report said.

More Canadians also find themselves working part-time because they don’t have better options.

Statistics Canada said the involuntary part-time rate – which refers to the proportion of part-time workers who did not find full-time work or worked part-time due to poor business conditions – was 18.2 percent in May. That’s up from 15.4% a year earlier.

Young people have also felt the consequences of the labor market slowdown. The report notes that for returning college students ages 20 to 24, the employment rate was down 2.9 percent from a year ago.

“In the last year, we’ve seen that youth employment conditions have really had an impact,” Bernard said.

Young people have been particularly affected by weaker employment trends as they tend to move in and out of the labor market, he explained.

Bernard said strong population growth among people aged 25 and under is also contributing to weaker employment among young people.

Meanwhile, US employers added a strong 272,000 jobs in May, accelerating from April and a sign that companies are still confident enough in the economy to continue hiring despite persistently high interest rates.

The data from both Canada and the US comes two days after the Bank of Canada opted to cut interest rates for the first time in four years, citing lower inflation and a weakening economy.

The central bank cut its key interest rate by a quarter of a percentage point to 4.75 percent and signaled that more rate cuts are on the way as long as inflation continues to fall.

“Taken together, this mixed bag doesn’t really move the needle on the Bank of Canada rate-a-meter. It is still consistent with increasing weakness in the economy, albeit with subdued wages,” Porter wrote.

Wage growth remained strong in May, with average hourly wages rising 5.1 percent from a year ago to $34.94.

Employment increased in health care and social care, finance, insurance, real estate, rental and leasing, business, building and other support services, and accommodation and food services.

Meanwhile, employment fell in construction, transportation and storage, and utilities.

This report by The Canadian Press was first published on June 7, 2024.

Nojoud Al Mallees, Canadian Press