Canada's jobless rate hits 7% as regions like Windsor and Oshawa face trade-related slowdowns
Canada’s unemployment rate rose to 7 percent in May, reaching its highest level since 2016 when pandemic years are excluded, as reported by Statistics Canada.
Despite a gain of 8,800 jobs, the labour market showed signs of broader weakness, particularly in manufacturing, transportation and trade-sensitive regions.
According to Statistics Canada, the total number of unemployed people stood at 1.6 million, marking a 13.8 percent increase over the past year. The unemployment rate has risen for three consecutive months and is now up 0.4 percentage points since February.
Full-time employment rose by 58,000, while part-time positions declined by 48,800, as reported by Financial Post.
Private sector jobs increased by 61,000, marking the first gain since January, while public sector employment declined by 21,000, following temporary hiring in April for the federal election.
Youth employment faced significant pressure, with the unemployment rate among returning students aged 15 to 24 reaching 20.1 percent.
According to Statistics Canada, this rate is comparable to May 1999 and May 2009 levels, excluding the pandemic years.
Average hourly wage growth for all employees remained at 3.4 percent year-over-year, with permanent employees seeing a 3.5 percent increase.
The employment rate held steady at 60.8 percent, matching the low observed in October 2024. Total hours worked were unchanged month-over-month but rose 0.9 percent from May 2024.
Labour market participation was further strained by longer job searches. The average duration of unemployment climbed to 21.8 weeks in May, up from 18.4 weeks a year earlier.
Statistics Canada noted that “people are facing greater difficulties finding work in the current labour market.”
Economists pointed to regional and sector-specific weaknesses.
Toronto-Dominion Bank economist Leslie Preston said manufacturing employment fell by 12,200 in May, while transportation and warehousing declined by 15,000.
She noted that over the past four months, manufacturing has lost a total of 55,000 jobs.
Job growth occurred in wholesale and retail trade, utilities, information, culture and recreation, and finance, real estate, insurance, rental and leasing.
Indeed Canada economist Brandon Bernard highlighted trade-sensitive regions such as Saint John, Sault Ste. Marie and Windsor, which saw sharper declines in job postings.
Windsor’s unemployment rate rose to 10.8 percent and Oshawa’s to 9.1 percent.
According to BMO Capital Markets economist Doug Porter, the “persistent rise in the jobless rate is a loud warning bell.” He said the labour market has shifted from a worker shortage to job scarcity over the past two years.
Although full-time and private sector gains were encouraging, he noted that “the overall job market continues to soften.”
The Bank of Canada held its policy interest rate at 2.75 percent earlier in the week, following stronger-than-expected core inflation data in April.
Deputy governor Sharon Kozicki said policymakers considered real-time feedback from trade-exposed businesses, which indicated fewer concerns about “catastrophic outcomes.”
Economists expect additional rate cuts in the second half of 2025.
CIBC’s Andrew Grantham said the gradual rise in unemployment will likely continue, with tariff-related disruptions and interest rate reductions needed to stabilise conditions before any meaningful improvement in 2026.
Capital Economics economist Bradley Saunders stated that while May’s job numbers exceeded expectations, “the labour market is struggling.”
He attributed job gains primarily to wholesale and retail trade and noted continued weakness in manufacturing, transportation and warehousing following the end of tariff front-running.
Royce Mendes of Desjardins said the May reading breached a “key threshold,” adding that signs of tariff-related job losses were visible in Ontario.
He also highlighted that slower population growth did not prevent the unemployment rate from rising and projected second-quarter GDP growth between zero and 0.5 percent.
Desjardins expects the Bank of Canada to reduce interest rates by 75 basis points to 2 percent by year-end.
The Canadian dollar rose slightly to 1.3667 to the US dollar, or 73.17 US cents, as reported by BNN Bloomberg. Bond yields on two-year government securities increased by four basis points to 2.672 percent.
According to swap market data, the likelihood of a 25 basis point rate cut in July stood at just 33 percent.
