Canada gains jobs but unemployment rate rises to 6.6%

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Canada’s economy added 22,000 jobs in August, but the country’s unemployment rate rose to 6.6 per cent, its highest non-pandemic level since May of 2017, with economists attributing the uptick to hiring not keeping pace with population growth.

The total number of unemployed Canadians rose to 1.5 million, 272,000 more than in August last year, according to data released by Statistics Canada on Friday.

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“With population growth strong once again and labour force participation rebounding, hiring in August wasn’t enough to keep the unemployment rate from rising two ticks to 6.6 per cent,” Royce Mendes, economist with Desjardins Group, said in a note to clients.

The labour force grew by 82,500 from July to August and was up 2.8 per cent compared to last year, Statistics Canada said.

The gains were made in part-time work (1.8 per cent), but were offset by losses in full-time work (minus 0.3 per cent). Private-sector employment rose for the first time since April, posting a gain of 38,000 positions after a loss of 42,000 jobs the previous month. Public-sector employment remained unchanged from the previous month.

The employment rate, which measures the proportion of the population aged 15 and older employed, decreased by 0.1 percentage points to 60.8 per cent in August. Notably, the employment rate on a year-over-year basis for youth and core-aged individuals was down, with larger declines among young men (4.5 per cent) and young women (3.5 per cent).

Statistics Canada said this is due to large population growth and a lack of employment growth for young people. The youth unemployment rate rose to 14.5 per cent, the highest level since August of 2012.

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Only 16.7 per cent of those who were unemployed in July were able to find employment in August, suggesting a challenging job market for most job seekers.

“The tough market for job seekers hasn’t particularly impacted job security, as layoff rates also held low,” Brendon Bernard, an economist at Indeed Canada, said. “The dichotomy between the two has meant the impacts of the labour market downturn have been particularly sharp on groups more on the margins of employment, while those in stable jobs are faring better.”

Sectors with the largest employment gains were educational services (1.7 per cent) and health care and social assistance (0.9 per cent). Health-care and social-assistance sector employment has grown by 157,000 positions in the past 12 months and accounts for nearly half of all the employment growth. Employment fell the most in personal and repair services, dropping 2.3 per cent.

Average hourly wages rose by five per cent in August compared to the previous year. This is a slight deceleration from July, when wages grew by 5.2 per cent year over year. The total hours worked dropped by 0.1 per cent, compared to July.

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Douglas Porter, chief economist at the Bank of Montreal, said wage growth will remain a sticking point for the Bank of Canada, which would like to see it decline further relative to productivity.

The Bank of Canada cut its policy rate for the third consecutive time on Wednesday to 4.25 per cent, citing slackening in the economy and labour market as a reason for its decision. Friday’s labour market data confirms this trend continued in August, with economists predicting two more cuts by year-end, and the likelihood of a deeper cut in October becoming more likely.

“The drop in hours worked suggests that overall activity remained soft in August — after flat GDP results for both June and July — reinforcing the downside risk to the Bank of Canada’s third-quarter GDP growth forecasts,” Porter said in a note. “There is still a lot of data before the October Bank of Canada meeting, but the odds of a 50-basis-point rate cut are building.”

• Email: jgowling@postmedia.com

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