Canada’s Unemployment Rate Hits 6.8%, Highest Since 2017, Excluding Pandemic

Canada’s unemployment rate rose to 6.8% in November, marking the highest level since January 2017, excluding the pandemic period, according to Statistics Canada. Despite the addition of 51,000 jobs during the month, an increased number of individuals actively seeking employment pushed the jobless rate higher from 6.5% in October.

The labour force participation rate climbed by 0.3 percentage points, reflecting an influx of working-age individuals entering or re-entering the job market. This uptick was a key factor in the unemployment rate increase, even as employment grew, predominantly in full-time positions.

The latest data paints a complex picture. James Orlando, director of economics at TD Bank, called the results “messy,” noting the contradiction between the rise in employment and the jump in unemployment.

“If you see a 50,000 job gain in one month, you might think the economy is thriving,” Orlando said. “But when the labour force grows significantly, it can offset these gains and elevate the unemployment rate.”

This nuanced report has fueled expectations of a significant interest rate cut by the Bank of Canada. While the central bank’s current policy rate stands at 3.75%, financial markets are now betting on a half-percentage point reduction at the next meeting.

Douglas Porter, chief economist at BMO, shifted his forecast to a half-point cut, stating, “The high jobless rate provides a strong rationale for aggressive easing.”

Unemployment trends varied across regions and demographics. Ontario experienced a sharp rise in its unemployment rate, climbing to 7.6% from 6.8% in October. Meanwhile, Prince Edward Island saw a notable improvement, with its rate dropping from 10% to 8%.

Youth unemployment also surged, reaching 13.9% for those aged 15 to 24. This marked a 2.3 percentage point increase compared to November 2023, the largest year-over-year rise among age groups.

Average hourly wages increased by 4.1% year-over-year in November, a slowdown from the 5% growth reported in October. Despite resilient consumer spending and ongoing employment gains, high interest rates have dampened hiring activity, particularly in sectors sensitive to borrowing costs.

The share of unemployed Canadians facing prolonged joblessness has also grown. Statistics Canada reported that 46.3% of unemployed individuals in November had not worked in the past year or had never worked, up from 39.5% a year earlier.

Bank of Canada Governor Tiff Macklem has remained non-committal about the size of future rate cuts, emphasizing that decisions will depend on evolving economic data.

Rhys Mendes, deputy governor of the Bank of Canada, highlighted expectations for economic growth to pick up in 2024 and 2025. “As growth accelerates, it should support a healthier labour market,” Mendes said during a recent appearance in Prince Edward Island.