Canada’s economy faced a setback in February with an 84,000 job loss and a rise in the unemployment rate to 6.7 percent, as per Statistics Canada. This decline was particularly driven by decreases in full-time and private sector employment, offsetting a brief growth period seen earlier. Job losses were notable in industries such as wholesale and retail trade, construction, and manufacturing, impacting men aged 25 to 54 and young individuals aged 15 to 24 the most.
Despite some indicators remaining stable compared to the previous year, such as the unemployment rate at 6.6 percent in February 2025, the participation rate decreased slightly to 64.9 percent. Average hourly wages increased by 3.9 percent to $37.56 per hour. Katherine Judge from CIBC Capital Markets expressed concerns over the labor market’s negative turn, emphasizing the loss of full-time and private sector positions.
Contrary to analyst predictions of a gain of 10,000 jobs, the actual job loss and increase in unemployment rate were alarming. This unexpected outcome raises concerns about labor market slack and economic activity, especially amid trade uncertainties as noted by Judge. The upcoming inflation data release on Monday will influence the Bank of Canada’s interest rate decision next Wednesday, with most economists expecting rates to remain unchanged.
The report, deemed “exceptionally weak” by economists, revealed a rise or stability in unemployment rates across most provinces and territories in February. Youth unemployment, particularly for those aged 15 to 24 at 14.1 percent, remained a challenge. Racialized youth faced even higher unemployment rates than their non-racialized, non-Indigenous counterparts.
Douglas Porter, chief economist at the Bank of Montreal, highlighted the lack of job growth over the past year, signaling economic weakness. He suggested that the current economic conditions do not support interest rate hikes but rather raise the possibility of rate cuts if the economic slump persists. Uncertainties like the USMCA and stagnant job growth contribute to a challenging environment for the Bank of Canada to consider raising interest rates.