U.S. tariffs begin to squeeze Canada’s labour market, jobless rate rises to 6.9%

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Canada lost more than 30,000 manufacturing jobs last month and Windsor, Ont., saw a jump in its unemployment rate as U.S. tariffs take aim at the automotive sector and feed into economic uncertainty.

Statistics Canada’s Labour Force Survey on Friday said employment increased by 7,400 nationally, though that figure was padded by an increase in election-related hiring. The overall unemployment rate rose to 6.9 per cent, up from 6.7 per cent in March.

The latest jobs figures illustrate how tariffs are beginning to squeeze the Canadian economy, affecting regions and industries most exposed to trade with the United States.

“It doesn’t take an archeological dig to realize this is a weak report,” Bank of Montreal chief economist Douglas Porter wrote in a client note.

“This is the first major data reading for April, and it shows that tariffs are already taking a material bite out of the economy.”

The April job figures were propped up by an increase in employment of 37,000 in public administration, which coincided with the temporary hiring of federal election workers.

Ontario saw the largest decline in employment, falling by 35,000, with most of those job losses in the manufacturing sector. In Windsor, a major hub for the automotive industry, the unemployment rate jumped by 1.4 percentage points, reaching 10.7 per cent.

Stellantis NV temporarily laid off 3,800 workers after closing its Windsor plant for a week beginning May 5. This followed a two-week closure in April, a move the company said it made to assess the impact of the tariffs on vehicles imported into the U.S.

Since April 3, imported cars have faced a 25-per-cent tariff based on their non-U.S. content.

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The effect of U.S. tariffs goes beyond the automotive industry, with layoffs in the aluminum and steel sectors as well. The U.S. continues to impose 25-per-cent levies on aluminum and steel imports, as well as a 25-per-cent tariff rate on goods that are not compliant with the U.S.-Mexico-Canada Agreement on trade (and a lower 10-per-cent rate on energy imports).

Economists expect global trade tensions, in addition to the U.S. tariffs imposed on Canada specifically, to further weigh on the economy in the coming months and drive up the unemployment rate to more than 7 per cent.

Michael Davenport, a senior economist at Oxford Economics, said fiscal stimulus from the federal government as well as less comprehensive countertariffs will lessen the impending slowdown.

“But we still think a recession is under way that will lead to 120,000 job losses and drive the unemployment rate to 7.4 per cent by the end of this year,” Mr. Davenport wrote in a client note.

Economists expect the April jobs report will increase the odds of a quarter-percentage-point interest rate cut by the Bank of Canada in June.

The Bank of Canada held its policy rate steady in April amid uncertainty in the trade outlook, but Governor Tiff Macklem signalled the central bank will be ready to act if needed.

The U.S. trade war has weighed on business and consumer confidence as the economic outlook deteriorates. Friday’s jobs report found that employees working in trade-exposed industries that depend on U.S. demand were more likely to anticipate fewer employees at their workplace over the next six months.

But most employees remain confident in their own job security, with just under three in four workers surveyed saying that they disagreed or strongly disagreed that they might lose their job in the next six months.

Meanwhile, average hourly wage growth slowed down last month to 3.4 per cent on an annual basis. Average hourly wages stood at $36.13.

With a report from Eric Atkins