Canada shed 33,000 jobs in March, the worst month for the labour market in three years, as the threat of U.S. tariffs weighed on business confidence and slowed hiring.
Job declines were widespread across industries, and concentrated in full-time positions and private-sector employment, Statistics Canada reported Friday. The unemployment rate ticked up to 6.7 per cent from 6.6 per cent in February. Bay Street analysts had expected a small increase in employment.
The March Labour Force Survey, which estimates labour conditions from March 9 to 15, is the first piece of hard data hinting at the effect of U.S. President Donald Trump’s trade war against Canada.
It’s too early to see a direct impact of U.S. tariffs, which were imposed throughout March and early April on Canadian goods that don’t comply with the United States-Mexico-Canada Agreement, as well as on steel, aluminum and automobiles. However, the threat of tariffs has shaken Canadian consumer and business confidence, which appears to be weighing on the labour market.
Following the publication of the data, financial markets upped their bets on another interest rate cut from the Bank of Canada at its next meeting on April 16. Traders now put the odds of another quarter-point cut at around 65 per cent, much higher than in recent weeks, according to LSEG data. Another cut would take the central bank’s policy rate to 2.5 per cent.
“The wheels may be starting to come off the Canadian labour market,” Andrew Grantham, Canadian Imperial Bank of Commerce senior economist, wrote in a note to clients. He noted that Canada’s job market had been fairly solid through the second half of last year and into January.
“However, the concerning recent trend, combined with the likelihood of further weakness ahead as U.S. tariffs start to impact hiring decisions, leans towards further reductions in interest rates from the Bank of Canada, although the timing will depend on next week’s business and consumer surveys as well as global risk sentiment,” Mr. Grantham wrote.
Statscan said layoff rates from February to March were in line with typical levels for that time of year, suggesting the weakness was more the result of slower hiring and normal attrition than outright layoffs.
The Canadian numbers stood in contrast to U.S. jobs data, also released Friday. U.S. employers added 228,000 new positions in March, well ahead of Wall Street expectations of 140,000, although earlier payroll figures for January and February were revised down by 48,000.
This suggests that the U.S. labour market was in relatively good shape as Mr. Trump embarked on his protectionist push to remake the global trading system. But that could change quickly.
Mr. Trump’s decision to impose sweeping tariffs on America’s trading partners this week has tanked financial markets and raised the odds of a recession. On Friday, China retaliated against the U.S. with a 34-per-cent duty on all U.S. goods, raising the prospect of spiralling global trade war.
“It’s an historical footnote on the economy that was before ruinous trade wars erupted,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, wrote in a note to clients about the U.S. jobs numbers.
In Canada, the Statscan data showed an unequal impact across provinces. Ontario lost around 28,000 jobs and the unemployment rate ticked up two notches to 7.5 per cent. Alberta and Quebec lost around 15,000 and 5,000 jobs respectively. Saskatchewan was the outlier, adding around 6,000 jobs, while employment remained fairly flat in most other provinces.
The wholesale and retail sector lost 29,000 jobs while the information, culture and recreation sector lost 20,000. Employment fell by a smaller amount in business support services, agriculture, manufacturing and construction. This was partially offset by increases in several sectors, including “other services” and transportation and warehousing.
“While U.S. tariffs will be the obvious culprit for the fall in employment in March, two-thirds of the decline was concentrated in the services sector, suggesting that other factors were at play,” Bradley Saunders, North America economist at Capital Economics wrote in a note to clients.
“Nonetheless, the broad-based weakness in last month’s Labour Force Survey does not bode well for the outlook, especially with timely surveys showing firms’ hiring intentions falling sharply.”
Total hours worked rose 0.4 per cent following a 1.3-per-cent decline in February – one of the few bright spots in the data. Average hourly wages were up 3.6 per cent year-over-year compared with 3.8 per cent in February.
Brendon Bernard, senior economist with Indeed Canada, said in a note that there’s no “smoking gun” in the March jobs numbers showing the impact of tariffs. “Instead, March’s weakness stemmed from a continuation of the trends that weighed on the job market in 2024, namely, slow hiring, which has made it tougher for those out of work to land a job,” he wrote.