The damage caused by tariffs and trade uncertainty continues to ripple through Canada’s labour market as the unemployment rate climbed to 7 per cent in May. This is the highest mark since 2016, excluding the COVID-19 pandemic.
The economy added a mere 8,800 jobs last month, consequently showing virtually no net gains since January.
Unemployment is expected to keep rising throughout the summer and could reach as high as 7.5 per cent. Even though trade tensions between the U.S. and Canada have not risen in recent weeks, ongoing uncertainty means businesses across sectors are pulling back in hiring and investments.
Canada’s economy did show some resilience thanks to an increase in full-time jobs—making the prospect of a July interest rate cut uncertain. Canada added 57,700 full-time jobs in May, more than offsetting the loss of 48,800 part-time jobs.
While the trade sector mostly recovered from April’s loss by adding 43,000 jobs, the effects are spreading across industries from accommodation and food services to transportation—which both lost 16,000 jobs.
Students face a tough summer job market as many seasonal jobs, such as those in accommodation and food services and retail, often depend on a growing economy and are among the fastest hit in a downturn.
The market is also particularly challenging for those currently unemployed as they take longer to find work (approximately 21.8 weeks on average) while new graduates are also entering a challenging market.
Youth unemployment reached 15.6 per cent, the highest since May 2021, while the unemployment rate for core-aged workers and those over 55 remained rather steady.
Job data can fluctuate wildly from one month to the next, so it is often helpful to look beyond monthly changes and examine trends.
Industries that saw the most gains include trade (43,000), information, culture, and recreation (19,000), and finance, insurance, real estate, and leasing (12,000). The gain in trade more than offset the loss of 26,800 jobs in April.
Since there’s been minimal movement in tariffs in recent weeks, some trade resumed as Canadian businesses made more of their exports compliant with the countries’ free-trade agreement to avoid U.S. tariffs. The share of CUSMA-compliant Canadian exports to the U.S. jumped from 38 per cent in 2024 to 58 per cent in April.
However, Canada’s trade surplus with the U.S. fell to its lowest since 2020, while trade with other countries reached all-time high. In the upcoming months, jobs in trade will remain precarious as businesses navigate this highly uncertain environment.
Public administration saw the sharpest drop in jobs of 32,000, but this is temporary and to be expected given the temporary gain due to the federal election in April.
Private sector hiring rose 61,000 in May, its first increase since January. This is another sign of resilience as businesses pivot and adapt to the new reality.
Wage growth stayed at 3.4 per cent, the same as April and indicative of an employers’ market where wage growth is no longer a contributor to inflation.
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