OTTAWA (Reuters) – Canada’s unemployment rate rose more than expected to 6.8% in November, the highest level in nearly eight years excluding pandemic years, even as the economy added a net 50,500 jobs, data showed Friday, raising the chances of a major crisis. interest rate cut next week.
Currency markets raised expectations for a 50 basis point rate cut next week to 68%, up from 55% before the employment report was released. An interest rate cut of 25 basis points is fully priced in.
Analysts polled by Reuters had forecast net growth of 25,000 jobs and an unemployment rate of 6.6%, up from 6.5% in October.
The rise in unemployment could push Canada’s central bank toward lower borrowing costs by a larger-than-normal half percentage point for the second time in a row, as reflected in the bank’s Dec. 11 rate announcement.
The unemployment rate has risen 1.7 percentage points since April 2023 and is now the highest since January 2017, not including the years of the coronavirus pandemic, Statistics Canada data shows.
The rise in unemployment was due to more people looking for work, the agency said in the last major economic data report released before the Bank of Canada’s interest rate announcement.
The Canadian dollar strengthened slightly after the jobs report at 1.4053 against the U.S. dollar, or 71.16 U.S. cents. The yield on government bonds with a term of two years fell by 7 basis points to 3.026%
Canada’s labor force grew by 137,800, more than double the increase in jobs, data shows.
In addition to signs of weakness in the labor market, average hourly wage growth for permanent workers slowed to 3.9% annually from 4.9% in October. Closely watched wage growth was the slowest since 3.9% in June 2023.
The BoC has cut its key policy rate by 125 basis points to 3.75% since June.
The new jobs in November were full-time jobs, which more than offset a small decline in the number of part-time jobs.
Overall, employment in the goods sector fell by a net 20,800 jobs, mainly in manufacturing, while the services sector gained a net 71,500 jobs, led by wholesale and retail trade.
The employment rate, or the share of the population working, remained at 60.6% in November after falling for six consecutive months, as employment growth kept pace with population growth, Statscan said.
(Reporting by Ismail Shakil and Dale Smith in Ottawa; additional reporting by Promit Mukherjee; Editing by Mark Porter)
