Canada’s Unemployment Rate Climbs to 6.8%, Increasing Likelihood of Significant Interest Rate Cut
Canada’s Unemployment Rate Climbs to 6.8%, Increasing Pressure for Steeper Interest Rate Cuts
Canada’s unemployment rate rose to 6.8% in November, fueling speculation about a 50-basis-point cut to the Bank of Canada’s policy rate next week, currently set at 3.75%, according to economists.
Friday’s Statistics Canada report revealed that markets are pricing in higher odds for a more aggressive monetary easing. This is the highest unemployment rate since January 2017, excluding pandemic-related anomalies. Despite the economy adding 51,000 jobs—45,000 of which were in the public sector—the sharp rise in joblessness has shifted economic forecasts.
Bank of Montreal Chief Economist Douglas Porter announced BMO’s revised prediction for a steeper rate cut, citing the unemployment spike as a decisive factor. “When the facts change, we change,” Porter wrote. “This is what we believe the Bank will do, not necessarily what we believe they should do.”
Andrew Grantham, a senior economist at CIBC, also emphasized that the unexpected rise in unemployment justifies a deeper cut by the central bank.
Statistics show 1.5 million Canadians were unemployed in November, an increase of 276,000 from the same period last year. Of those, nearly half have not worked in over a year or have no work experience.
Youth unemployment surged to 13.9%, reversing recent declines, with increases among both young men and women aged 15 to 24. Among core-aged groups, the jobless rate for women rose to 5.8%, while men held steady at 5.7%. The employment rate remained unchanged at 60.6%, suggesting limited job availability for those seeking work.
David Rosenberg, president of Rosenberg Research & Associates, noted in a client briefing that November’s job-seeking surge was “the largest since the return-to-work era of 2022,” overwhelming Canada’s sluggish economy.
Sectoral employment gains were seen in construction (+18,000 jobs), wholesale and retail trade (+39,000), and professional services (+17,000). However, declines in manufacturing, transportation, warehousing, and natural resources offset these increases.
Wage growth slowed in November, with year-over-year average hourly earnings rising 4.1%, compared to 4.9% in October.
Unemployment rates rose in major cities, with Windsor posting the highest at 8.7%, followed by Edmonton (8.3%), Toronto (8.1%), and Calgary (7.9%).
The mixed labor market signals leave policymakers balancing inflation control with the growing need for economic support.
