Canada’s labour market is currently facing significant challenges, particularly with rising youth and immigrant unemployment rates. In July, the country’s unemployment rate held steady at 6.4 percent, with the economy shedding around 2,800 jobs. This soft reading has raised concerns among economists, who suggest that it could lead to continued interest rate cuts by the Bank of Canada, reflecting the ongoing struggles in the labour market.
One of the most affected groups in the labour market are youth and recent immigrants. The youth unemployment rate rose to 14.2 percent in July, the highest level since September 2012, excluding the pandemic years. Among returning students, the unemployment rate reached 17.2 percent, the highest level for July since 2009. Statistics Canada attributes this increase to a more challenging summer jobs market this year, with the employment rate for returning students aged 15 to 24 dropping by 6.8 percentage points from the previous year.
Recent immigrants also faced significant challenges in the labour market, with their unemployment rate jumping by 3.1 percentage points to 12.6 percent in July compared to the previous year. Among immigrant youth, the unemployment rate surged to 22.8 percent during the same period. In comparison, the unemployment rate for people born in Canada rose by 0.5 percentage points over the last year to 5.6 percent in July.
The job market in July saw a shift from part-time to full-time work, with part-time employment declining by 64,000 jobs and full-time employment increasing by 62,000 jobs. However, on a year-over-year basis, part-time jobs grew at a faster pace compared to full-time jobs. Private sector employment declined by 42,000 jobs in July, while public sector employment increased by 41,000 jobs. Regionally, employment declined in Manitoba and Nova Scotia, while Ontario and Saskatchewan saw increases.
The Bank of Canada has expressed concern about the deteriorating job market conditions, with Governor Tiff Macklem citing labour market challenges as a factor in the central bank’s decision to cut its key interest rate again. The labour force participation rate fell to 65.0 percent in July, the lowest since June 1998, excluding the pandemic years. In comparison with the United States, the unemployment rate in Canada was 5.4 percent in July, 1.1 percentage points higher than in the US.
Overall, Canada’s labour market is facing significant struggles with rising youth and immigrant unemployment rates. The challenges in the job market have prompted the Bank of Canada to take action to boost economic growth and address the ongoing issues. It is crucial for policymakers and stakeholders to work together to find solutions to support vulnerable groups and improve the overall labour market conditions in the country.