Canada’s unemployment rate rose again last month, as the economy struggles to create enough jobs to match the pace of population growth.
Statistics Canada reported Friday employment was little changed in July, falling by 6,400 jobs.
Meanwhile, the unemployment rate ticked up to 5.5%, marking the third consecutive month that the unemployment rate has risen.
May served as a turning point in the labour market, as the unemployment rate rose for the first time in nine months. Prior to that, the unemployment rate was hovering at 5%, just above the all-time low of 4.9% reached last summer.
As Canada’s population continues to grow rapidly, rising unemployment signals the economy isn’t creating enough jobs to absorb a larger workforce.
“We’ve seen a consistent increase in the number of people without a job in Canada, but people that are still in the labour force,” said James Orlando, TD’s director of economics.
Job vacancies have also declined in the country, offering another sign that the labour market is loosening.
Orlando says high population growth is helping the economy stay afloat as newcomers add to demand. So instead of high interest rates leading to outright job losses, Orlando says the unemployment rate is rising.
“When people come to Canada, even if they don’t get a job right away, they’re consumers, right? They’re looking for housing, they need to buy food, they need to buy clothes. And so they’re buying stuff within the economy. And that is a demand shock,” Orlando said.
“It’s putting a floor under the economy at a time when most people would have thought it would be contracting.”
The federal agency said job losses last month were led by the construction industry, while the greatest job gains were made in health care and social assistance.
High interest rates are expected to push unemployment even higher as borrowing costs rise for both businesses and consumers.
The Bank of Canada has raised its key interest rate to 5.0%, the highest it’s been since 2001.
The central bank is hoping its aggressive rate hikes slow the economy down enough to bring inflation to its two per cent target.
It’s cited concern about the pace of wage growth as well, which rebounded in July, rising 5.0% year over year.
Inflation in June fell to 2.8%, within the Bank of Canada’s target range of 1-3%. But core measures of inflation which strip out volatility show prices are still rising quickly and new forecasts from the central bank suggest it expects inflation to get back to two per cent by mid-2025.