Canadian labour force participation up in April

Ajouté : 2026-05-12

[00:00:00]Canada lost nearly 18,000 jobs in April, moving the unemployment rate up to six to a six-month high. Let's get some perspective on this from Dylan Smith, founder and chief economist at Arc Macro. Thanks for joining us today.

[00:00:13]Thanks, BNN Raw. Would you say that increase to the rate is mostly from more people looking for jobs?

[00:00:20]A little bit of a combination of both.

[00:00:22]So, you know, as we as we heard up front there, you know, employment did fall.

[00:00:28]There were, you know, less jobs in the country in total than there were before. But also we saw participation rising, breaking the trend actually that has been ongoing for a few months. More people entering the workforce this month and that actually had a a larger effect on the unemployment rate. So, we had about 33,000 people coming in to the labor force and a drop of of 18,000 jobs and that was enough to add those 0.2 percentage points to bring the employment rate almost to 7% again.

[00:00:57]Historically, is there a time of year where more people enter the workforce?

[00:01:02]Yeah, so this this brings up the the notion of seasonal adjustment. The the headline figures we get from for Stats Can are not seasonally adjusted.

[00:01:11]And so, you know, if you do run a seasonal adjustment on these numbers and and the official numbers are out there if you look for them, there were actually a small number of jobs added.

[00:01:21]And so, usually at this time of year, you know, based on that we we see things cooling down a little and then picking up again with with seasonal working over the summer. So, you know, there's a few factors at play that making the data wobble around a little bit on the margin, but I think the overall message here is that, you know, the the labor market is not as strong as we would like it to be and we can get into the reasons for that. Okay, so let's talk a little bit about some of the details here. The goods-producing sector, which is heavily affected by American tariffs, lost almost 27,000 jobs in April. Do you see this trend continuing? We've had some US court decisions that go against the American tariffs. So, I'm just wondering if this could improve in the next few months.

[00:02:05]Uh it could improve. It's all down to what happens in negotiations around Cosma.

[00:02:11]And you know, I'm not going to stand here and predict what's going to happen there.

[00:02:16]Um you know, we can run it through a few scenarios, but if you're a business trying to plan for the next 6 months, 1 year, and you're you're wondering about how much staff should we bring on to meet to meet a potential increase in orders from abroad or a potential decrease of if negotiations don't go well, it's very very difficult to make a decision. And so, what we're seeing is that, you know, sectors that are more exposed to trade with the United States and trade with the world are creating less employment or are losing employment.

[00:02:47]And, you know, stickier services-based industries that are are more correlated to kind of just domestic conditions, uh health care, professional services, uh that's that's actually doing quite well. So, you know, everything like like with most things at the moment, um if you if you want to look at the outlook, there's a huge binary around what happens uh in these trade negotiations.

[00:03:10]Um and it is is it is fundamentally uncertain, which is why you aren't getting firms making big decisions yet.

[00:03:16]>> Yeah. Yeah, putting us back almost 18 months when we're waiting for the tariff announcements and what that would look like. Okay, you mentioned health care, for example, I think you're which does make sense. Are there other sectors of the economy you see as being resilient?

[00:03:31]Well, I think one of the most interesting ones actually at the moment uh is is if the information services sector, which I think posted the biggest or second biggest world decline in jobs this month, but actually is is well above where it was trending in 2025. So, this month's particular numbers are a bit misleading.

[00:03:48]It's actually been a good source of job creation. And this goes into the into the debate around AI and the skills that may or may not may not be being replaced.

[00:03:58]You know, we we believe quite strongly actually that demand for you know, for coders, for software engineers, all these types of skills is actually going to be rising more and more as AI starts to sort of move its way out of just the tech economy and into the into the rest of the services industry and beyond.

[00:04:17]Because you're going to need people who know what they're doing to to implement it, to work out how it you know, feeds into the how a business runs itself, making sure that quality is there, looking for issues. And so, you know, we see that as actually a a very high potential for robust job creation no matter what happens on the on the trade side. We don't have a Bank of Canada here that has to look at labor and and try and make sure your labor up front is secure, but they will take that into consideration for for what they do. If you were the Bank of Canada and looking at the numbers today for job losses as well as the possibility for inflation from fuel prices, what would you do?

[00:04:57]Yeah, that's exactly right. I mean the the bank's primary mandate is to you know, is to make sure the inflation is stable and lower or within the target band.

[00:05:08]And so the the big kind of kind of question that they're asking themselves at the moment is will we eventually need to raise rates to see off this inflation shock that's coming. And for the moment that inflation is limited to to energy prices and so they can say quite rightly well, we can hold rates where they are for now and look through that, but we're going to be very attentive. But there's always the risk that at the same time, you know, as the inflation is is arguing for higher rates, you get the economy weakening underneath that because spending is being reallocated to to these inflationary categories that have inelastic demand. And so you might need to actually give some monetary accommodation to to prevent the economy from stalling.

[00:05:50]Very challenging time to be a central banker, but what this employment data does is it says, you know, actually on the margin this argues for for being a little more dovish, for holding rates a little more steady than we would if say the economy was running pretty hot and we were seeing this oil price shock. And it's interesting to compare Canada there to the US where, you know, there's just generally more inflationary conditions from the AI build-out, from uh tighter immigration policy, uh from tariffs, uh which mean that the the oil price shock is coming on top of already inflationary conditions. And so, we think the Fed will have to raise interest rates, whereas the Bank of Canada won't.

[00:06:28]Um and so, you can run through the implications for relative rate differentials, um and, you know, what might happen to the exchange rate as a result.

[00:06:35]Dylan, I've got to leave it there.

[00:06:36]Thanks for your time. Dylan Smith, founder and chief economist at Arc Macro.