Canada added 25,000 jobs in November as its unemployment rate climbed to 5.8%, its highest level since January 2022, Statistics Canada reported on Friday.
Together with the weak third-quarter gross domestic product report on Thursday, November’s jobs data adds more evidence to the argument for the Bank of Canada to shift its focus from rate hikes to rate cuts.
Now, as long as inflation stays in check, the Bank of Canada might start cutting rates in April. For now, at its meeting next week, a hold at 5% seems certain.
In the employment report, the days of the data painting a mixed picture of the economy seem to be ending, with most of the data pointing to a slowdown in economic activity. The unemployment rate, which rose from 5.7% in October, is poised to reach 6% by early next year.
One positive reversal from last month’s report is the gain in full-time work. Part-time employment dropped by 34,700 while full-time employment rose by 59,600.
The rise in unemployment might have stemmed from recent newcomers not being able to find work, though layoffs are more common now than last year.
Read more of RSM Canada’s insights on economics and the middle market.
For the first time since May, the services-producing sector lost jobs (13,400), signaling weakened demand in that sector after being so resilient since COVID restrictions were relaxed.
The decline comes mainly from trade (26,900) and finance, insurance and real estate (18,400). High interest rates have put a dent in real estate activity.
At the same time, goods-producing industries added 38,300 jobs, with 28,000 in manufacturing and 16,000 in construction.
An estimate of 6 in 10 recent immigrants have struggled to find work in the field, which suggests an issue of skill underutilization and underemployment.
Ontario’s proposed legislation to eliminate requirements for Canadian work experience, if passed, would help more immigrants contribute to the economy at a higher level and raise productivity.
In addition, there has been a consistent rise in hybrid work arrangements since the pandemic, especially for parents of young children. Given the new flexibility, it is likely that jobs that allow for remote or hybrid arrangements will continue to be favored by workers.
Looking ahead, the economy might still add jobs but unemployment will rise to the low-6% range by early next year as population growth outpaces job growth. Hiring will be slow until the middle of the year as businesses delay investments and grapple with a more challenging economic environment.