UPDATE 1-Canada's August unemployment rate at nine-year high outside of pandemic

Canada had almost 1.6 million people unemployed in August as the economy lost thousands of jobs and its unemployment rate scaled over a nine-year peak barring the pandemic years, data showed on Friday. Its unemployment rate rose 0.2 percentage points in August to 7.1%, a level last seen in May 2016 if the COVID-19 years of 2020 and 2021 were excluded, StatsCan said

The economy shed 65,500 jobs in August, largely in part-time work, it said, and added that this was fueled not only by lower hiring but also some layoffs with the layoff rate rising to 1% in August, compared with 0.9% observed 12 months earlier. The number of job losses in August was the worst level since January 2022.

Canada's economy has shown resilience in the last few months in the face of U.S. tariffs on steel, aluminum and cars but the labor data from Statistics Canada showed that the pass through effects of tariffs had started to impact other sectors. Analysts polled by Reuters had forecast net job gains of 10,000 and the unemployment rate to edge up to 7% in August from 6.9% in the previous month.

The employment rate, or the number of people employed out of the total population, fell to its highest level since the pandemic to 60.5% in August. The participation, a critical metric that shows how many people were economically active, was at 65.1%, also lowest since the pandemic. Persistent uncertainty around the U.S. trade policy has kept businesses on tenterhooks, forcing minimal hiring and investments, impacting the job market and economic growth. It has seen big job losses in the auto manufacturing and steel sectors.

The major brunt of this phenomenon has been on the transportation and the manufacturing industry. Transportation and warehousing lost 22,700 jobs and manufacturing lost 19,200 jobs in August, StatsCan said. But this was surpassed by a loss of 26,100 jobs in professional, scientific and technical services. This category is a part of the services-producing sector that accounts for almost 80% of all jobs in the economy. The services sector shed a net 67,200 jobs.

Job gains were only primarily seen in construction, a part of the tariff-hit goods-producing sector, which increased the number of jobs by 17,100. The average hourly wage of permanent employees - a gauge closely tracked by the Bank of Canada to ascertain inflationary trends - grew by 3.6% in August to C$37.81 per hour, against a 3.5% increase in the prior month.

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