Canada’s economy took an unexpected hit on the job market in April, while unemployment also crept up, raising concerns about the strength of the economy ahead of the Bank of Canada’s rate decision next month.
Statistics Canada’s labour force survey released on Friday said the economy shed 18,000 jobs in April, following an increase of 14,000 jobs in March.
The loss came as the unemployment rate rose to 6.9 per cent compared with 6.7 per cent in March, returning to where it was in October last year, largely because more people were looking for work.
Economists had expected the economy to add jobs for the month and the unemployment rate to hold steady.
“If you look at the drivers of that increase in the unemployment rate, in particular for April, it was not driven by permanent layoffs, so that’s kind of the good news,” RBC assistant chief economist Nathan Janzen said.
“What drove the unemployment rate higher, a lot of it was people quitting their current job to look for a new one.”
While Janzen said it isn’t a good indication that people aren’t immediately able to find a new job, it does signal confidence in the labour market that people are willing to quit their jobs in search for another.
The Bank of Canada held its overnight lending rate at 2.25 per cent last month — its fourth consecutive hold after back-to-back quarter-point drops in September and October of last year.
The central bank said it was closely monitoring the impact of the Middle East war and how the economy continues to respond to U.S. tariffs and trade policy uncertainty.
In a note to clients Friday, TD senior economist Andrew Hencic said given the soft jobs report and the limited ability for companies to pass on inflation shock price increases to consumers, he expects the Bank of Canada to continue to hold this year, if the sharp rise in oil prices begins to reverse in the coming weeks.
Earlier this week, the head of the International Energy Agency warned the global energy crisis from the war in Iran will hit Canadians soon.
Fatih Birol said it’s the worst energy crisis the world had ever seen. And while Canada has been somewhat insulated from the full effect of the price shocks so far, he warned that would soon change.
“If Canada’s future or current customers are economically weak, their ability and appetite to buy energy or other things will be weaker,” Birol said in Ottawa on Tuesday.
Adding to the concerns surrounding Canada’s economy is the uncertainty around the trade agreement between Canada, the United States and Mexico that is up for a mandatory review this year.
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