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Tariff uncertainty causes Canada to lose jobs for the first time since 2022 in March

Data released on Friday showed that Canada's employment total fell in March and the unemployment rate increased. The uncertainty surrounding tariffs and the subsequent implementation of them forced some companies to stop hiring and resulted in layoffs. Last month, Canada lost a net of 32,600 positions, its first decline in over three years. Statistics Canada reported that the decline was primarily due to a sharp drop in full-time employment. This was after a relatively flat growth of jobs in February, and a strong gain of 211,000 jobs between November and January. The unemployment rate increased to 6.7% from 6.6% one month earlier.

Andrew Grantham is a senior economist with CIBC Capital Markets. He wrote in a recent report that "the wheels could be falling off the Canadian labour market." Analysts polled had predicted a net gain of 10,000 jobs and estimated that the unemployment rate would rise to 6.7%.

The majority of economists expected that the job market would start to show signs of weakness as companies held off on hiring and investing due to the uncertain situation with tariffs. U.S. president Donald Trump imposed a 25 percent tariff on Canadian aluminum and steel in March, and increased import duties for cars and parts due to non-U.S. contents and non-compliance of a free-trade agreement. He announced reciprocal tariffs that would affect all U.S. trade partners.

Analysts have predicted that these reciprocal tariffs, and the retaliation of many countries, will hit the global economic system hard, sending many countries into recession.

Unemployment may peak. The Canadian dollar is trading at 1.4194 U.S. dollars, or 70.45 U.S. Cents, down from 1.4194 the day before. This represents a steep increase in the probability of another Bank of Canada interest rate cut on April 16. It was only 25% the day before. Last month, it was reported that Canadian job losses were already underway in certain sectors. Economists believe that layoffs are only going to increase as reciprocal tariffs between trading partners take effect.

Grantham stated that "we continue to expect further weakness in the employment sector, especially in sectors directly affected by U.S. Tariffs. This could lead to the unemployment rate reaching slightly over 7% in the second half."

Statscan reported that the increase in the unemployment rate or the number unemployed people as a percent of the workforce was the first since November. Statscan reported that there were 1.5million unemployed in total in March. This is an increase of 36,000 for the month, and 167,000 over the past year.

Last month, the Bank of Canada stated that Canadians are more concerned about their financial and job security as a result of trade tensions and plan to spend more carefully. Statscan reported that 44% of the unemployed had been laid off within the past 12 months. 18,4% of these people last worked in construction, and 12.4% in wholesale or retail.

It clarified, however, that the layoff rate for March - the percentage of employed people who are unemployed in the month following a layoff -- was 0.7%. This is similar to pre-pandemic levels. The Canadian central bank closely monitors the average hourly wage of permanent employees to gauge inflationary trends. In March, it was 3.5%, up from 4% in February. Reporting by Promit MUkerjee, Editing by Dale Smith Mark Porter and Paul Simao

(source: Reuters)