Canada loses jobs in March for first time since 2022 on tariff uncertainty

By Promit Mukherjee

OTTAWA (Reuters) -Canada's total employment fell and the unemployment rate ticked up in March, data showed on Friday, as the uncertainty around tariffs and their subsequent implementation forced companies to pause hiring and spurred some layoffs.  

The country shed a net 32,600 jobs last month, the first decrease in more than three years. It was driven by a steep decline in full-time work, Statistics Canada said.

The employment decline followed largely flat job growth in February and a robust gain of 211,000 new jobs from November to January. The unemployment rate rose to 6.7% in March from 6.6% a month earlier.

"The wheels may be starting to fall off the Canadian labor market," Andrew Grantham, senior economist at CIBC Capital Markets, wrote in a report.

Analysts polled by Reuters had forecast a net job gain of 10,000 people and had estimated the unemployment rate to rise to 6.7%. 

Most economists had expected the job market to start showing signs of weakening as companies held back on investments and hiring due to the uncertain tariff situation.

U.S. President Donald Trump has imposed a 25% tariff on Canadian steel and aluminum from March and slapped import duties on cars and parts based on non-U.S. content and non-compliance with a free trade deal. He also announced sweeping reciprocal tariffs aimed at all U.S. trading partners.

These reciprocal tariffs and retaliation by many countries are expected to hit the global economy hard, pushing many countries into recession, analysts have said.

UNEMPLOYMENT MAY PEAK 

The Canadian dollar was trading down 0.72% to 1.4194 to the U.S. dollar, or 70.45 U.S. cents, after China imposed retaliatory tariffs on the U.S.

Currency markets are betting there is a 62% chance of yet another interest rate cut by the Bank of Canada on April 16, a sharp rise from the 25% chance seen a day earlier.

Reuters had reported last month that Canadian job losses had already started in some sectors, and economists predict that the layoffs will only climb as the reciprocal tariffs across trading partners work through the system.

"We continue to expect some further weakness in employment ahead, particularly in sectors most directly impacted by U.S. tariffs, which could see the unemployment rate peak slightly above 7% during the second half of the year," Grantham noted.

The rise in the unemployment rate, or the number of people unemployed as a percentage of the labor force, was the first increase since November, Statscan said.     

In total, there were 1.5 million unemployed people in March, a rise of 36,000 in the month and up 167,000 on a year-over-year basis, it said. 

The Bank of Canada said last month that Canadians were more worried about their job security and financial health as a result of the trade tensions, and they intend to spend more cautiously. 

Statscan said that among the total unemployed, about 44% had lost their job due to a layoff within the previous 12 months. Of these, 18.4% last worked in the construction sector, while 12.4% last worked in wholesale or retail trade. 

However, it clarified that the March layoff rate - the proportion of the employed population in a given month who were unemployed the following month due to a layoff - was 0.7%, similar to the pre-pandemic period. 

The average hourly wage growth of permanent employees, a metric closely watched by the Canadian central bank to gauge inflationary trends, was 3.5% in March, compared to 4% in February.

(Reporting by Promit Mukherjee; Editing by Dale Smith, Mark Porter and Paul Simao)