Recent immigrants shut out of strong wage growth as unemployment rises in Canada
Statistics Canada’s labour force survey on Friday showed the economy added a modest 22,000 jobs last month, lagging the pace of population growth.
Kkritika Suri
Canada’s unemployment rate continued its upward trend in August, reaching 6.6 percent as the job market slowdown impacts workers and job seekers unevenly.
According to Statistics Canada’s labour force survey released on Friday, the economy added a modest 22,000 jobs last month, which lagged behind the pace of population growth.
The unemployment rate rose from 6.4 percent in July.
Employment increased in educational services, health care and social assistance, and finance, insurance, real estate, rental, and leasing sectors last month. However, there were declines in other services, as well as in professional, scientific, and technical services, utilities, and natural resources.
As high interest rates continue to strain the job market, students and recent immigrants are bearing a significant portion of the burden. Students faced a particularly tough summer job market this year, with their unemployment rate reaching its highest level since summer 2012, excluding the pandemic summer of 2020. From May to August, the average unemployment rate for students was 16.7 percent, up from 12.9 percent last year.
RBC assistant chief economist Nathan Janzen noted in a client report that much of the increase in the unemployment rate is due to longer job searches for new labor market entrants, particularly students, while layoffs are also rising.
The summer job market was especially challenging for Black, Chinese, and South Asian students, who experienced significantly higher unemployment rates. Black students faced the highest rate at 29.5 percent, an increase of 10.1 percent from summer 2023.
This latest rise in unemployment follows the Bank of Canada’s recent decision to cut interest rates for the third consecutive time and indicate that more cuts may be forthcoming. Governor Tiff Macklem has repeatedly emphasized the central bank’s desire for economic growth to rebound, acknowledging the significant slowdown in the job market.
With job-seeking becoming more difficult, the number of unemployed individuals grew to 1.5 million in August, marking a 22.9 percent increase from the same month last year. The report also highlights that only 16.7 percent of those unemployed in July had found work by August, a smaller proportion compared to August 2023.
Janzen commented that from the Bank of Canada’s perspective, the combination of higher unemployment and ongoing declines in per-capita GDP supports the need for further interest rate cuts.
Despite the slowdown in hiring, workers have continued to experience rapid wage growth, with many regaining their pre-pandemic purchasing power. Average hourly wages in August rose five percent from the previous year, reaching $35.16.
However, wage growth for recent immigrants has remained stagnant, with a 1.3 percent decrease in average hourly wages year-over-year for those who arrived in Canada within the last five years. In contrast, more established immigrants saw their average hourly wages increase by 6.3 percent, while Canadian-born workers experienced a six percent rise in wages over the same period.
