Canadian Unemployment Rate Has Now Hit 7%

Canada’s unemployment rate rose to 7% in May — its highest in over eight years, excluding the pandemic — with just 8,800 jobs added, according to the Financial Post..

Full-time employment increased by 58,000, offset by a decline in part-time work. Private sector jobs grew by 61,000, while public sector employment fell by 21,000 due to fewer temporary hires after April’s federal election.

The Financial Post writes that manufacturing lost 12,200 jobs last month, contributing to a four-month decline of 55,000. Transportation and warehousing also shed 15,000 positions. Employment grew in wholesale and retail trade, utilities, finance, and real estate but dropped in manufacturing, public administration, and accommodation and food services.

Economists say the rise in unemployment is partly due to U.S. tariffs dampening hiring, with trade-sensitive regions like Windsor (10.8% jobless rate) and Oshawa (9.1%) hit hardest. Indeed Canada noted job postings have remained steady since February but are lower in trade-impacted areas.

“The impact of tariffs shows up in the industry pattern and regional unemployment pattern,” said Leslie Preston, senior economist at Toronto-Dominion Bank. “The manufacturing sector was down 12,200, as was transportation and warehousing (-15,000).”

Preston said manufacturing has lost a total of 55,000 jobs over the past four months.

Youth unemployment reached 20.1%, reflecting the start of the summer job market. The employment rate held steady at 60.8%, with total hours worked unchanged from April but up 0.9% from a year ago. Average hourly wages rose 3.4% year-over-year.

Bank of Canada policymakers are closely watching these developments, holding rates at 2.75% last week amid inflation concerns. In a note, Andrew Grantham, senior economist with the Canadian Imperial Bank of Commerce, said: “We expect that the gradual rise in joblessness will continue into the second half of the year, with positive developments regarding U.S. tariffs and some further interest rate cuts from the Bank of Canada required to help stabilize conditions before year-end and bring a reduction in the unemployment rate again in 2026.”

Still, economists said the larger trend of the rising unemployment rate could mean further rate cuts by the Bank of Canada during the second half of this year, with the jobless rate expected to peak above seven percent.