Is a recession looming?
Canada’s job market weakened sharply in March, posting the largest monthly employment drop in over three years and adding pressure on the Bank of Canada ahead of its next rate decision.
Statistics Canada reported Friday that the economy shed 33,000 jobs last month, with the unemployment rate inching up to 6.7%. Economists in a Bloomberg survey had forecast a modest gain of 10,000 positions, matching the actual increase in unemployment.
It was the first monthly job loss since July and the largest since January 2022. The decline followed February’s tepid gain of 1,100 jobs. In the first quarter, net job creation totalled about 44,000 — significantly below the 132,000 recorded in the final quarter of 2024.
Full-time and private sector jobs hit hardest
The decline was concentrated in full-time employment and the private sector. Trade-sensitive industries — including wholesale and retail trade, culture and recreation, agriculture, and manufacturing — saw the biggest losses.
“This is the worst full-time print in four years. And one of the worst ever,” Rishi Mishra, an analyst at Futures First Canada Inc., said in an email to Bloomberg.
Canada’s labour market is showing signs of strain from recent US trade actions. While the country avoided inclusion in the latest round of American tariffs this week, previous measures and Canada’s retaliatory levies appear to be weighing on economic momentum.
“Although the country escaped getting hit during Trump’s latest round of tariffs, levies are now in place on several of the country’s most important export categories,” Karl Schamotta, chief market strategist at Corpay told Bloomberg. “A broad swath of industries remains vulnerable to a downturn in US demand.”
Regionally, Ontario and Alberta posted job declines, with losses in Alberta concentrated in manufacturing and trade. Saskatchewan saw employment gains, while other provinces were largely unchanged.
Rate cut expectations
The disappointing report has led traders to increase their bets that the Bank of Canada may lower interest rates at its next policy meeting on April 16. Yields on two-year government bonds fell to their lowest levels since March 2022, and the Canadian dollar weakened to around $1.423 per US dollar.
“The wheels may be starting to fall off the Canadian labour market,” said Andrew Grantham, economist at CIBC.
Yearly wage growth for permanent employees slowed to 3.5% in March from 4% the month prior, below expectations. The employment rate fell to 60.9%, down 0.2 percentage points.
Economists say inflation data due the day before the central bank’s meeting may be critical in determining whether a rate cut will be announced.
“The deterioration of the labour market may be signalling the start of a possible recession,” said Charles St-Arnaud, chief economist at Alberta Central.
What are your thoughts on Canada’s job market shift? Share your insights in the comments below.
