Canada’s continuously worsening unemployment rate could further cement its position at the bottom of G7 countries, according to a Market View report from the National Bank of Canada.
Canada’s unemployment rose to 6.4% in Jun.
“Already the 1.6% pt increase from the 2022 trough is the largest in the G7 and just off the podium among OECD nations,” said National Bank of Canada’s director of economics and strategy, Taylor Schleich.
Inflation in Canada rose 2.9% between May 2023 and May 2024. The only two provinces to keep their heads above water were Manitoba and Saskatchewan, which saw their consumer price index increase by 1.3% and 1.5%, respectively.
Schleich said that “the labour market is gasping for air.”
He said that should the labour market continue to worsen, an unemployment rate of 7% or higher could be in store for Canada this year.
The projections from the National Bank of Canada predict that unemployment will surpass 7% and approach 8% by next spring, an outcome that interest rate cuts would theoretically counter.
The economist added that the United States has seen a similar upward path in unemployment, while not to the same extent. Over the last two years, unemployment in the United States has generally hovered between just under 3.5% and 4%, according to the Bureau of Labor Statistics.
The United States is projected to cut interest rates faster than Canada this year, said Schleich.
“While BoC easing could help stem labour market weakness, policy lags mean cuts need to come sooner than later. To us, a July cut should be considered a higher probability outcome, as only a disastrous June CPI report should leave the BoC sidelined,” said Schleich.
May’s inflation data were released on June 25. April’s data were released on May 21. June’s data can be expected to be released similarly around the end of July.
The two provinces that remained below the pack for total inflation in May 2024 were Manitoba and Saskatchewan, which have removed their fuel and carbon tax.
The number of immigrants entering Canada far exceeds the number of jobs being created. In June, Canada lost 1,400 jobs while the working population grew by 98,700. There were officially 42,000 new unemployed Canadians.
Despite adding 27,000 jobs in May, Canada’s working population grew by 97,600 people, causing unemployment to rise by a tenth of a percentage point.