Canada's unemployment rate ticks up to 7% in May, highest in 9 years outside of pandemic

Canada's unemployment rate rose to seven per cent in May, the highest it's been in nine years outside of the pandemic, Statistics Canada said on Friday.

In its latest Labour Force Survey, the data agency says the unemployment rate has risen to its highest level since 2016, with the exception of the high jobless rates seen during 2020 and 2021.

There has been "virtually no employment growth" since January after strong gains in the fall, Statistics Canada added. The economy added just 8,800 jobs during the month, showing little change from April.

The number of employees hired into the private sector rose in May for the first time since the beginning of the year, and public sector employment fell due to the end of the federal election period, which ramped up seasonal hiring.

A 58,000 gain in full-time positions was offset by the loss of 49,000 part-time positions. Wholesale and retail trade led the way in job gains, adding 42,800 positions, while the information, culture and recreation sector gained 19,300.

The public administration sector lost 32,200 jobs. Manufacturing, one of the sectors most vulnerable to tariff-related job losses, shed an additional 12,200 jobs in May after losing 31,000 roles in April.

"Overall, our ranking gives this report a passing grade, largely due to the strength in private sector and full-time jobs, but the persistent rise in the jobless rate is a loud warning bell," wrote Douglas Porter, chief economist at BMO.

"The main point is that slack is still growing in the labour market, suggesting that the Bank of Canada may not be done cutting rates just yet."

The central bank's next interest rate decision is on July 30. 

Overall, there were 1.6 million unemployed people in Canada in May, a 13.8 per cent increase from the same period last year, according to the data agency.

A smaller share of people who were unemployed in April — when the jobless rate stood at 6.9 per cent — found work in May compared to the same period in other comparable years.

"This indicates that people are facing greater difficulties finding work in the current labour market," the agency said.

Porter, in his note to clients, observed that "we have gone from a situation in 2022 and 2023 when it was difficult to find workers to, today, when it is difficult to find work."

Unemployed people also spent more time looking for work — 21.8 weeks, or about five months — compared to a year earlier, when the average was 18.4 weeks.