Could a rate cut be on the horizon for Canada?
Canada’s unemployment rate edged up to 6.9% in April, marking the highest level since early 2017 outside the pandemic period, according to data released by Statistics Canada. The increase, up from 6.7% in March, comes despite a modest gain of 7,400 jobs, a report from Financial Post noted.
The latest labor force survey indicates significant weakness in key trade-related sectors. Employment in manufacturing plunged by 31,000 positions—its steepest monthly decline since November 2024—while wholesale and retail trade also shed 27,000 jobs. The construction, natural resources, and hospitality industries likewise reported losses.
Impact of trade tensions
Economists pointed to US tariffs on Canadian exports as a driving factor behind the slump, warning that the job market may face deeper challenges if trade disputes persist. “The weak details of the April job numbers highlight the negative turn the Canadian economy could be facing if trade tensions don’t cool,” said Brendon Bernard, senior economist at Indeed Canada.
The rise in unemployment also coincides with a 0.1 percentage point increase in labor force participation, which reached 65.3%. This means more people were actively looking for work, but not enough jobs were created to absorb the growing workforce.
While the private sector saw little change, public sector employment increased by 23,000, buoyed by a 37,000-job surge in public administration—largely due to temporary federal election work. Additional gains were noted in real estate, finance, insurance, rental, and leasing sectors, which have collectively added 64,000 jobs since October.
Rate cut on horizon?
Bank of Montreal’s chief economist Douglas Porter suggested that without the public administration boost, overall employment figures would have reflected a loss. “It doesn’t take an archeological dig to realize this is a weak report,” he said, adding that the data bolsters the case for a rate cut by the Bank of Canada in June.
Indeed, the central bank left its benchmark interest rate unchanged at 2.75% in April, signaling a wait-and-see approach as it gauges the impact of tariffs and economic slowdown. Some analysts now believe further loosening of monetary policy may be imminent.
Among those unemployed in March, 61% remained jobless in April—up from 57.3% in the same period last year—highlighting growing difficulty in finding work. In addition, the number of people on temporary layoff or actively seeking work rose by 39,000 in April and is up 189,000 year-over-year.
Despite the grim outlook, total hours worked rose by 0.4% month-over-month, and average hourly wages grew 3.4% annually.
As trade challenges and labor market softness continue to shape the economic landscape, economists caution that without policy responses or resolution to trade disputes, more Canadians may find themselves without work in the months ahead.
