Canada’s unemployment rate holds steady at 6.4%

For returning students, the unemployment rate was even higher at 17.2 per cent, the highest level for the month of July since 2009, excluding the pandemic. Statistics Canada attributed the level of youth joblessness to a much more difficult summer jobs market this year, a view shared by economists.

“The key takeaway is that employment has not grown in the past two months, the jobless rate remains almost a percentage point higher than a year ago, and it has been a really challenging summer job market for students,” wrote Douglas Porter, chief economist at the Bank of Montreal, in a note to clients. “This backdrop doesn’t increase the urgency of rate cuts, but it also does nothing to dissuade them.”

Among recent immigrants, the unemployment rate jumped by 3.1 per cent to 12.6 per cent, compared to July of last year. Among immigrant youth, the unemployment rate jumped to 22.8 per cent in the same period.

The employment rate overall declined in July by 0.2 per cent to 60.9 per cent, with declines reported in part-time work (-64,000) and an increase in full-time work (+62,000). However, the number of part-time jobs created over the last year (+3.4 per cent) has outpaced the number of full time jobs (1.4 per cent), on a year-over-year basis.

The participation rate also fell to 65 per cent, its lowest point since 1998, excluding the pandemic. Nathan Janzen, assistant chief economist at the Royal Bank of Canada, thinks the unemployment rate would have been worse in July, if not for the number of Canadians dropping out of the labour market.

“There was nothing in the July Canadian labour force data to say that the ongoing cooling in labour markets has run its course,” Janzen wrote in a note to clients on Friday. “The unemployment rate is still up almost a percentage point from a year ago, and would have increased further in July without a large drop in the labour force participation rate.”

Employment gains have also differed between the private sector and the public sector. Employment in the private sector declined by 42,000 in July and employment in the public sector rose by 41,000. Compared to July of last year, the private sector has added 86,000 jobs, outpaced by the 205,000 jobs added in the public sector.

Wage growth, one of the stickier contributors to inflation, decelerated slightly in July to 5.2 per cent, down from the 5.4 per cent year-over-year increase in June.

As for what this means for the Bank of Canada’s next rate decisions, economists continue to predict four straight cuts by the end of this year.

“The labour market is weak, but it’s not falling off a cliff — at least not yet,” wrote Royce Mendes, economist at Desjardins, in a note to clients. “Still, central bankers need to get rates down ahead of the mortgage renewal wall in 2025. As a result, we see the Bank of Canada moving at each of its upcoming decisions until at least the middle of next year.”