Surprise employment figures and trade uncertainty raise odds of another BoC cut within weeks
Canada’s job market took an unexpected hit in March, renewing speculation that the Bank of Canada could move forward with another interest rate cut later this month.
According to Statistics Canada, the country lost 33,000 jobs in March, marking the first monthly decline since January 2022 and falling well short of analysts’ expectations for a 10,000-job gain. The unemployment rate ticked up to 6.7%, from 6.6% in February, and while that remains below the recent high of 6.9% seen in November, it continues a broader upward trend that began over a year ago.
“Since March 2024, the unemployment rate has remained above its pre-COVID-19 pandemic average of 6% (from 2017 to 2019),” StatsCan noted. The agency also highlighted that it's now taking longer for unemployed Canadians to re-enter the workforce.
Full-time jobs take the hit
Doug Porter, chief economist at BMO Capital Markets, pointed to steep declines in full-time and private-sector positions, with full-time roles dropping by a “heavy 62,000.”
He added that the overall unemployment rate would have climbed even higher if not for a decline in the labour force participation rate. One small positive was a rise in total hours worked — though Porter interpreted that to mean employers are asking existing workers to do more, rather than hiring new staff.
While March’s job numbers preceded the full implementation of US tariffs on steel and aluminum, Porter said the regional breakdown suggests the pressure is already being felt. Ontario, Quebec, Manitoba, and Alberta all saw job losses.
“Ultimately, we believe that Ontario is most at risk from US protectionism, and its jobless rate rose two ticks to 7.5%,” he told the Financial Post.
Porter believes the Bank of Canada will take a wait-and-see approach, although he acknowledged that falling energy prices and the end of the carbon tax are likely to ease inflation, potentially giving the central bank more room to maneuver.
Poor employment numbers and slumping stock markets will “keep prospects of an April rate cut very much alive,” Porter said.
Tariffs taking a toll
At Capital Economics, North America economist Bradley Saunders described the March labour data as “broad-based weakness” that supports concerns over a deteriorating outlook. He said business hiring intentions have already “sharply” declined, and the impact of US tariffs is beginning to show.
Saunders specifically cited a 7,000-job decline in manufacturing, attributing it to disruptions caused by new trade measures from the US. While Canada avoided the harshest of the so-called “Liberation Day” tariffs, he warned that GDP growth — and by extension, hiring — is likely to slow further in 2025.
As a case in point, Saunders referenced Stellantis NV’s recent decision to shut its Windsor, Ontario auto plant for two weeks, affecting around 4,000 workers.
“This is evidence of the uncertainty that US tariffs will pose for Canadian manufacturers going forward,” Saunders said.
Capital Economics now predicts the unemployment rate will rise to 7%, and that the economic slowdown will push the Bank of Canada to cut rates again on April 16.
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Tu Nguyen, economist at RSM Canada, also noted volatility in job numbers, tying the swings to businesses reacting to US tariff uncertainty. Employers may have over-hired earlier this year, only to pull back now that trade restrictions have materialized.
“With many tariffs now in place, the trend in the upcoming months is more layoffs and unemployment as tariffs cause widespread economic pain,” Nguyen said.
She expects the effects to be especially pronounced in sectors such as wholesale, retail, manufacturing, and auto production, along with steel and aluminum, all of which are vulnerable to the 25% tariffs now in effect.
“Weariness about the macroeconomy and recession fears, including that of a global recession, will cause layoffs and delays in hiring across sectors,” Nguyen said.
Nguyen believes the scale of March’s job losses could nudge the Bank of Canada toward another 25-basis-point rate cut in April, bringing the benchmark rate to 2.5%.
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