Unemployment jumped in April, strengthening the case for a June rate reduction
Canada’s jobless rate rose in April with manufacturing jobs bearing the brunt of the shock from Donald Trump’s global tariff war as the case for a Bank of Canada interest rate cut next month strengthened.
Statistics Canada said on Friday that national unemployment rose to 6.9% last month, up from 6.7% in March, as election-related hiring heavily skewed labour market figures and helped the economy add 7,400 jobs.
More than 30,000 jobs in manufacturing were shed as the automotive sector buckled under the weight of huge tariffs launched by Trump on Canadian imports – and Windsor, a hotbed of automotive manufacturing, saw its unemployment rate spike by 1.4%.
Bank of Montreal (BMO) chief economist Doug Porter said the news made a central bank cut at its next meeting, scheduled for June 5, more likely.
“It doesn’t take an archaeological dig to realize this is a weak report,” he wrote. “Labour market slack is building, and wage gains have slowed to a three-year low. This is the first major data reading for April, and it shows that tariffs are already taking a material bite out of the economy. This clearly increases the odds of a 25-bp rate cut in June.”
New data from the Labour Force Survey for the month of April 2025:
— Statistics Canada (@StatCan_eng) May 9, 2025
⬇️ Employment rate declined 0.1 percentage points to 60.8%.
⬆️ Unemployment rate rose 0.2 percentage points to 6.9%.https://t.co/yLVDOUX3Tc pic.twitter.com/pxW9l8Pi6g
Meanwhile, Royal Bank of Canada (RBC) senior economist Claire Fan said much will depend on whether the trade war rumbles on – but indicated further challenges could be ahead for the Canadian economy.
A reduced pace of population growth as well as lower demand for Canadian exports because of Trump’s tariffs, she said, will continue to present “headwinds” for job growth.
“The economic outlook still remains highly contingent on the evolution of international trade risks but job openings have continued to edge lower,” Fan wrote, “signalling more softening in hiring in the pipeline.”
RBC expects the unemployment rate will jump above 7% this year as the labour market continues to slow, while StatCan said Canadians working in industries dependent on US demand were more likely to anticipate the number of employees at their workplace to decline in the coming six months.
Trump met with Canadian prime minister Mark Carney at the White House on Tuesday – but there remains little clarity on the chance of a reduction or removal of the president’s levies on imports from Canada in the weeks ahead.
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