Unemployment rate rises to 6.9% in April as trade war hits factory jobs

The national unemployment rate ticked up to 6.9 per cent in April as the manufacturing sector started to strain under the weight of tariffs from the United States, Statistics Canada said Friday.

The Canadian economy added 7,400 jobs last month, the agency said, slightly outpacing economist expectations for a gain of 2,500 positions.

But the unemployment rate also rose two tenths of a percentage point in April, topping economists’ call for a jobless rate of 6.8 per cent.

At 6.9 per cent, the unemployment rate is back at its recent high seen in November. Before then, the jobless rate had not hit that level since January 2017, outside the pandemic years.

While the economy did add jobs in April, the rising unemployment rate suggests employers were not hiring as quickly as Canada’s population was growing.

Statistics Canada noted that’s a reversal of earlier this year, when strong employment gains coincided with slowing population growth.

Canada’s manufacturing industry led job losses in April, shedding 31,000 positions, with the bulk of the impact in Ontario.

The hit came after the United States imposed tariffs starting in March on non-CUSMA compliant imports from Canada as well as sector-specific levies on steel and aluminum and automobiles.

Manufacturing-heavy Windsor, Ont., saw its unemployment rate jump 1.4 percentage points to 10.7 per cent last month.

Statistics Canada said the April figures showed the first significant decline in manufacturing jobs since November, though employment levels for the industry remain steady year-over-year.

The wholesale and retail trade sector also lost some 27,000 jobs in April.

Offsetting the declines last month was a gain of 37,000 jobs in the public administration sector, which Statistics Canada said was largely temporary work tied to the federal election in April.

Average hourly wages rose 3.4 per cent in April, down slightly from 3.6 per cent in March.

BMO chief economist Doug Porter said in a note to clients Friday that the details of the April jobs report are worthy of a failing grade for the labour market, with the trade war serving as a clear source of weakness.

"This is the first major data reading for April, and it shows that tariffs are already taking a material bite out of the economy," he said.

The April job figures mark the last reading the Bank of Canada will get on the health of the labour market before its next interest rate decision set for June 4.

The central bank held its benchmark rate steady at 2.75 per cent at its decision last month, breaking a streak of seven consecutive cuts as it waited for more clarity on how Canada's trade dispute with the United States would unfold.

Ali Jaffery, senior economist at CIBC, said in a note that the latest jobs report supports the case for a return to cuts in June.

"Overall, we are seeing a job market that was weak heading into the trade war, now looking like it could soon buckle," Jaffery said.

Porter echoed that call, arguing the odds are now higher for a quarter-point cut for June.

Despite economic uncertainty tied to the U.S. trade dispute, most workers were telling Statistics Canada they felt secure in their jobs.

Some 73.9 per cent of workers aged 15-69 disagreed when asked if they thought they’d lose their job in the next six months, though the proportion of those who felt otherwise was highest in industries reliant on exports to the United States.

Picture Courtesy: CANADIAN PRESS/Sean Kilpatrick