Canada sheds tens of thousands of jobs as tariffs dent hiring plans

OTTAWA: The Canadian economy lost tens of thousands of jobs in July, sending the share of people employed to an eight-month low, data showed on Friday (Aug 8), as the labour market gave back gains from the previous month.

The economy shed 40,800 jobs in July, compared with a net addition of 83,000 jobs in June, taking the employment rate, the percentage of people employed out of the total working-age population, to 60.7 per cent, Statistics Canada said.

The unemployment rate held steady at a multi-year high of 6.9 per cent.

Analysts polled by Reuters had forecast a gain of 13,500 jobs and a small uptick in the unemployment rate to 7 per cent.

"Canada's labour market snapped back to reality in July," said Michael Davenport, senior economist at Oxford Economics.

TARIFFS HIT MANUFACTURING

US President Donald Trump's sectoral tariffs on steel, aluminium and autos have hit the manufacturing sector hard, reducing hiring intentions, the Bank of Canada has previously said.

The number of people employed in manufacturing fell by nearly 10,000 in July from a year earlier as sectors linked to steel, aluminium and autos scaled back hiring and carried out layoffs.

Marty Warren, national director of the United Steelworkers in Canada, told Reuters that about 1,000 members have been laid off.

Oxford Economics’ Davenport expects more layoffs in the coming months, forecasting about 140,000 job losses and an unemployment rate rising to the mid-7 per cent range later this year.

Employment in some sectors has remained resilient despite tariffs, the data showed. Overall, there has been little net employment growth since the start of the year, while the layoff rate was virtually unchanged at 1.1 per cent in July compared with the same month a year earlier.

YOUTH BEAR THE BRUNT

The bulk of July's job losses occurred among workers aged between 15 and 24, whose unemployment rate edged up to 14.6 per cent, the highest since September 2010, excluding the pandemic years of 2020 and 2021.

The employment rate for this group, which makes up about 15 per cent of the working-age population, fell to 53.6 per cent, the lowest level since November 1998 if the pandemic years are excluded.

The youth unemployment rate is typically higher than the national average.

POLICY RATE OUTLOOK

The Bank of Canada kept its key policy rate unchanged last week, partly due to labour market strength, but said it may reduce lending rates if inflation stays contained and economic growth slows.

"We are now a bit more confident in our view that the Bank of Canada will resume cutting next month, although a surprisingly strong CPI print next week could prompt another pause," said Alexandra Brown, North America economist at Capital Economics.

Money market bets put the odds of a rate cut at the next policy meeting on Sep 17 at 38 per cent, up 11 percentage points from Thursday.

The Canadian dollar was trading down 0.07 per cent at 1.3753 against the US dollar, or 72.71 US cents.

The information, culture and recreation sector lost 29,000 jobs in July, the largest decline, followed by a drop of 22,000 jobs in construction and 19,000 in business, building and other support services.

The average hourly wage of permanent employees, a measure closely watched by the Bank of Canada for inflationary trends, rose by 3.5 per cent in July to C$37.66, compared with a 3.2 per cent gain in June.