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, as the labor market gave back the gains seen in the prior month. The economy shed 40,800 jobs in July, compared with a net addition of 83,000 jobs in June, taking the employment rate, or the percentage of people employed out of the total working-age population, to 60.7 percent, Statistics Canada said.
The unemployment rate, however, remained steady at a near multi-year high of 6.9 percent. Analysts polled by Reuters had forecast the economy would add 13,500 jobs and the unemployment rate would tick up to 7 percent. 'Canada's labor market snapped back to reality in July,' Michael Davenport, senior economist at Oxford Economics, wrote in a note.
US President Donald Trump's sectoral tariffs on steel, aluminum and autos have hit the manufacturing sector hard and reduced the hiring intentions of companies, the Bank of Canada has previously said.
The number of people employed in manufacturing shrank by close to 10,000 in July on a yearly basis as sectors linked to steel, aluminum and autos curtailed hiring and experienced layoffs.
Marty Warren, the United Steelworkers' national director for Canada, told Reuters that about 1,000 members have been laid off. Oxford Economics' Davenport predicts more layoffs in the coming months, forecasting about 140,000 lost jobs and an unemployment rate rising to the mid-7 percent range later this year. Employment in some areas has held up well despite tariffs, the data showed.
Overall, there has been little net employment growth since the beginning of the year, StatsCan said. The layoff rate was virtually unchanged at 1.1 percent in July compared with 12 months earlier. The bulk of the job losses in July occurred among workers aged between 15 and 24 - that group's unemployment rate edged up to 14.6 percent, the highest since September 2010 excluding the pandemic years of 2020 and 2021.
The youth unemployment rate is usually higher than the country's average. The employment rate for this group, which accounts for around 15 percent of the total working-age population, sank to 53.6 percent, the lowest level since November 1998 if the pandemic years are excluded.
The Bank of Canada kept its key policy rate unchanged last week, partly due to a strong labor market but indicated it might reduce lending rates if inflation stays under control and economic growth weakens. '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 (Consumer Price Index) print next week could prompt another pause,' said Alexandra Brown, North America economist at Capital Economics. Money market bets show the odds of a rate cut at the next monetary policy meeting on September 17 at 38 percent, up 11 percentage points from Thursday.
Meanwhile, Prime Minister Carney is scrambling to save his country's relationship with Mexico after it disintegrated late last year when Canadian officials suggested they'd be better off negotiating a trade deal with the Trump administration alone. Carney attempted to break the ice in a phone call with Mexican President Claudia Sheinbaum in July by complimenting an indigenous-made soccer ball she had gifted him at their last meeting and saying he hoped to visit Mexico soon.
The warm overture, relayed to Reuters by three people familiar with the call, highlights Canada's attempt to repair the damage after a string of public slights by Canadian officials, including Ontario Premier Doug Ford, who said in November that any comparison of Canada to Mexico was 'the most insulting thing I've ever heard.' Mexico and Canada are in many ways natural allies. They've benefited from trilateral trade deals with the US for 31 years: first the North American Free Trade Agreement in 1994 and subsequently the US-Mexico-Canada Agreement that replaced it in 2020.
But the relationship between the two countries has been beset by allegations of betrayal on both sides and memories of fraught negotiations with Trump. Top officials virtually stopped talking in November after former Canadian Prime Minister Justin Trudeau mused about cutting a trade deal with the US without Mexico, suggesting the US and Canada were more aligned on issues like China. — Reuters
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