By Promit Mukherjee

OTTAWA (Reuters) – Canada’s unemployment rate rose to 6.9% in April, the highest since November, as U.S. tariffs impacted Canada’s export-dependent economy.

The unemployment rate increase, with approximately 1.6 million jobless individuals, was partly attributed to U.S. President Donald Trump’s tariffs on various Canadian imports, affecting the manufacturing sector, as reported by Statistics Canada.

Overall, the employment number remained flat with minimal gains of 7,400 jobs in April, contrasting with the previous month’s loss of 32,600 jobs.

Analysts had predicted a rise in employment by 2,500 people and an unemployment rate increase to 6.8%. The 6.9% figure matches the November rate, marking an eight-year high outside the pandemic.

Trump’s previous tariffs on Canadian steel, aluminum, and automobiles alongside various import duties have significantly impacted businesses and households.

The Bank of Canada projected a potential decrease in growth due to declining exports, rising prices, reduced hiring, and increasing layoffs, promising decisive action if the economy requires urgent assistance.

Ali Jaffery, senior economist at CIBC Capital Markets, stated, “Overall, we are seeing a job market that was weak heading into the trade war, now looking like it could soon buckle. Today’s report supports the case for a Bank of Canada cut in June.”

BETS ON JUNE RATE CUT

Currency swap market bets show odds of a 25 basis point rate cut in June at over 55%.

The Canadian dollar was trading up 0.1% to 1.3909 U.S. dollar, or 71.90 U.S. cents. Yields on two-year government bonds decreased 3.3 basis points to 2.586% following the labor force data release.

The number of unemployed individuals, including those seeking work or temporarily laid off, increased by 39,000 or 2.6% in April, accumulating a 189,000 or 13.9% year-over-year rise.

“People who were unemployed continued to face more difficulties finding work in April than a year earlier,” reported Statscan, highlighting that among those unemployed in March, 61% remained without work in April, nearly four percentage points higher than the previous year.

The tariffs and associated uncertainty primarily affected the manufacturing sector, which lost 31,000 jobs that month, with the retail and wholesale trade also experiencing employment decreases.

The employment rate in April was 60.8%, reflecting a 0.2 percentage point decline since March, marking a six-month low according to the statistics agency.

The employment rate had been suppressed for much of 2023 and 2024 due to population growth outpacing employment gains. However, since February, population growth has been relatively low, coupled with slowed employment gains.

Employment within the public sector rose by 23,000 or 0.5% in April, following three months of stability attributed to increased temporary hiring for the federal election.

Average hourly wage growth for permanent employees, a key indicator monitored by the Canadian central bank for inflation trends, stood at 3.5% in April, unchanged from March.