Canada’s unemployment rate surged to 6.1% in March, driven largely by population gains outpacing job growth.
Statistics Canada reported a net loss of just 2,200 positions in March, but rise in the national unemployment rate to a two-year high of 6.1%, up from 5.8% in February. A consensus of economist forecasts had expected a reading of 5.9%.
The job losses were concentrated to three provinces, Quebec (-16,700), Saskatchewan (-9,900) and Manitoba (-2,700), while all of the other provinces saw job growth, led by Ontario (+56,600).
“The big story is the rising jobless rate, resulting from strong population/labour force flows that even solid job gains aren’t absorbing,” noted BMO senior economist Robert Kavcic.
In 2023, Canada’s population grew faster than it has at any other time since 1953, surging 3.2% to 40,769,890 as of January 1 of this year.
A report from Oxford Economics noted that the working-age population of those 15 and older rose 90,700, or +0.3%, in March, due to continued strength in international migrant inflows into Canada.
“We expect the labour market will continue to weaken in the months ahead as hiring slows and layoffs mount,” the report reads. “This, together with strong immigration-led labour supply growth, and a partial retracement of the participation rate, will likely push the unemployment rate to the 7.5% range later this year.”
Others, like CIBC’s Andrew Grantham, see a more modest rise in the unemployment rate.
“With GDP expected to weaken in Q2 following the surprisingly strong start to the year, we would expect to see further softening in the labour market with the unemployment rate peaking close to 6.5%,” he wrote. “However, interest rate cuts starting in June should bring a re-acceleration in growth, which will help to stabilize the labour market in the second half of the year and into 2025.”
What this means for the Bank of Canada’s upcoming rate decisions
Today’s labour report isn’t expected to change much in terms of the anticipated timing of the Bank of Canada’s first rate cut, with most forecasts and market pricing still pointing to the Bank’s June meeting.
“Today’s report casts a cloud over the Canadian economy, but it is unlikely to change the Bank of Canada’s thinking when it meets next week,” wrote TD Economics senior economist James Orlando.
While he says that while recent data outside of today’s employment report have been strong and provided the BoC more time to wait and monitor the impacts of its rate hikes to date, “markets are increasingly betting that the BoC will pull the trigger on its first rate cut in June.”