Canada’s unemployment rate rises to 7% despite strong August job growth

Canada added 26,200 jobs in August - far more than analysts expected - but the unemployment rate rose to 7.0 per cent.
Canada added 26,200 jobs in August - far more than analysts expected - but the unemployment rate rose to 7.0 per cent. Mike Groll/AP File Photo

OTTAWA – The roller-coaster Canadian job market roared higher in August, climbing back from its July plunge, but economists cautioned the longer-term trend for growth remains sluggish.

The economy created 26,200 net new jobs in August compared with a loss of 31,200 in the previous month, Statistics Canada said Friday.

However, even with the increase in the number of jobs, the unemployment rate crept up to 7.0 per cent compared with 6.9 per cent in July, as more people entered the labour force and started looking for work.

Economists had expected a gain of 15,000 jobs and the unemployment rate to hold steady at 6.9 per cent, according to Thomson Reuters.

Bank of Montreal chief economist Doug Porter called it a respectable report with a few mildly encouraging details, providing a small antidote to the nastiness of July.

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READ MORE: Canada loses over 31,000 jobs in July
“In many respects this is really just the mirror image of what we saw last month,” Porter said.

“If you average those two months out, it shows jobs are pretty much flat which has been the story almost for the last twelve months … I think the bigger picture is the economy is struggling to really churn out a meaningful amount of new jobs.”

Canada’s jobs numbers have been volatile.

August’s employment data included a gain of 52,200 full-time jobs, nearly offsetting a loss of 71,400 full-time positions in July. The number of part-time jobs in August fell by 26,000 compared with a gain of 40,200 the previous month.

However compared with 12 months ago, the economy has added just 77,400 jobs as 35,700 full-time jobs have been lost and 113,100 part-time positions have been added.

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The gain in August was due in large part to an increase in the number of public sector employees that climbed 57,000, while the number of private sector jobs increased 8,300. The number of self-employed workers slipped by 39,100.

But compared with 12 months ago, there were 5,500 fewer public sectors jobs and 96,700 more private sector jobs. The self-employed category was down by 13,800.

CIBC economist Andrew Grantham said even with the rebound in August, the six-month average sat at about 8,000 new jobs a month, modestly below the 13,000 average monthly job gain of 2015.

“While the gain in headline employment made up for most of the disappointment seen in the prior month, the decline in working hours and the still subdued underlying trend in hiring suggest that the broader trend in the economy remains lacklustre,” Grantham wrote in a report.

The number of jobs rose in Quebec by 22,000 in August as its unemployment rate edged up to 7.1 per cent from 7.0 per cent, while Newfoundland and Labrador gained 4,000 jobs in the month as its unemployment rate moved down to 12.3 per cent from 12.8 per cent. New Brunswick lost 3,000 jobs, with its unemployment rate dropping to 9.4 per cent from 9.7 per cent.

Statistics Canada said there was little change in the other provinces, but noted that Ontario saw an increase in its unemployment rate to 6.7 per cent from 6.4 per cent in July as more people sought work.

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The Canadian economy contracted in the second quarter at an annual pace of 1.6 per cent for the three-month period. However, economists expected a bounce back in the third quarter as work in the oilsands halted by the Alberta wildfires swings back into production.

The jobs report follows the Bank of Canada’s decision earlier this week to keep its key interest rate target on hold at 0.5 per cent, as it noted that a drop in exports earlier this year was larger and more broad-based than expected.

However, the Bank of Canada says it still expects a “substantial rebound” in the economy in the second half of the year.

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