The Blubber

Canada’s unemployment rate climbed to 7.0% in May, reaching its highest level in nearly a decade outside of the COVID-19 pandemic, Statistics Canada reported Friday.

According to the latest Labour Force Survey, the jobless rate now stands at its highest point since 2016—excluding the sharp spikes seen in 2020 and 2021. The agency noted that since strong hiring gains in the fall, employment growth has largely stalled, with "virtually no employment growth" since January. In May, the economy added just 8,800 jobs, showing little change from the previous month.

Private sector hiring saw its first uptick since the start of the year, while public sector employment declined, largely due to the end of the federal election period which had temporarily boosted seasonal jobs.

There was a net gain of 58,000 full-time positions, but this was largely offset by the loss of 49,000 part-time jobs. Job gains were led by wholesale and retail trade, which added 42,800 positions, followed by the information, culture, and recreation sector, which saw a gain of 19,300.

However, job losses were significant in the public administration sector, which shed 32,200 positions. The manufacturing sector—a key area vulnerable to trade and tariff disruptions—lost an additional 12,200 jobs in May, following a 31,000-job decline in April.

Douglas Porter, chief economist at BMO, characterized the report as “passing,” primarily due to the strength in full-time and private sector hiring. But he warned that the rising unemployment rate is a clear signal of a cooling labour market.

"The main takeaway is that slack is still building in the job market, which could mean the Bank of Canada isn't finished cutting interest rates," Porter wrote.

The central bank is set to make its next rate decision on July 30.

In total, 1.6 million Canadians were unemployed in May, up 13.8% compared to the same time last year. Fewer people who were unemployed in April found work in May than typically seen in comparable years.

“This points to increasing challenges for job seekers,” the agency said, highlighting ongoing softness in the labour market.