Canada’s rate hikes are finally beginning to slow unemployment, but the losses are being carried by young adults. Statistics Canada (Stat Can) data shows the unemployment rate increased in July as job losses came in. Breaking it down, most of the jobs lost are young adults, or people in the education and construction industries. Higher interest rates are finally slowing down the job market, but not for seniors, the only employment demographic to grow in Canada.
Canada’s Unemployment Rate Rises, But Still Unusually Low
Canadian unemployment fell for a third consecutive month. Seasonally adjusted employment fell by 39,700 jobs in July, bringing the unemployment rate 0.5 points higher to 5.4%. Previous losses had been attributed to a lack of workers. “… this time we can’t pin it on a lack of workers,” said Douglas Porter, chief economist at BMO.
Most jobs lost were full time, with education representing the bulk of the decline. “The details of the report weren’t great either, with full-time jobs dropping a hefty 77,200, and both goods-producing and service industries falling,” said Porter.
He emphasizes while the decline isn’t great, the unemployment rate is still at an overheated level. “[the unemployment rate is] still at a level (5.4%) that had been seen only once in the 45 years before the pandemic,” he explained
Canada’s Young Adults Are Getting Crushed, They Represent Most Losses
Notable is who was losing their job and searching for work — young adults. Most of the jobs lost last month were people between the age of 20 and 24, representing a loss of 31,200 jobs from a month before. The unemployment rate for this group increased to 8.6%, up 1 point, and significantly higher than the average.
Workers from 25 to 54 years old also took a big hit. The cohort lost 25,700 jobs, with unemployment rising 0.6 points to 4.6% in July. At least the unemployment rate for this demographic is still extremely tight.
Canada’s seniors saw some losses, but were generally winners of the group. Workers aged 55 and older saw employment rise 10,800 jobs, with the unemployment rate rising just 0.3 points to 5%. Not only is the rate still below the average with the smallest growth of any cohort, it’s also still full employment.
Housing Slowdown Starts To Bite, Conditions Are Cooling Fast
Higher interest rates are beginning to slow down employment. Construction jobs fell 28,200 jobs in July, representing the bulk of losses when combined with education. While education might pick up in the September report, construction is more likely to be a little longer. Rates are only expected to climb further from here.
“While we can readily find some “yes, buts” in this release, there is no debating that conditions are cooling quickly, with the pullback in construction a clear indication that rate hikes are beginning to bite,” said Porter.
Remember, these are still strong employment numbers, and the market is considered overheated. However, this is an overheated labor market that’s producing more inflation than economic output. Job losses are likely to result in an economic contraction before inflation stabilizes, making it difficult to use rate cuts to soften the blow without seeing even more risk.
