OTTAWA (Reuters) -Canada’s unemployment rate rose more than expected to 6.8% in November, a near-eight-year high excluding the pandemic years, even as the economy added a net 50,500 jobs, data showed on Friday, boosting chances of a large interest rate cut next week.
Currency markets increased the bets for a rate cut of 50 basis points next week to 68% from 55% before the employment report was released. A rate reduction of 25 basis points is fully priced in.
Analysts polled by Reuters had forecast a net gain of 25,000 jobs and an unemployment rate of 6.6% from 6.5% in October.
The jump in unemployment may nudge the Canadian central bank toward lower borrowing costs by a larger-than-typical half a percentage point for a second consecutive time at the bank’s rate announcement on Dec 11.
The unemployment rate has risen 1.7 percentage points since April 2023 and is now the highest since January 2017, excluding the coronavirus pandemic years, Statistics Canada data showed.
The rise in the unemployment rate was due to more people looking for work, the agency said in the last major economic data report to be released before the Bank of Canada’s interest rate announcement.
The Canadian dollar slightly strengthened after the jobs report to 1.4053 to the U.S. dollar, or 71.16 U.S. cents. Yields of government’s two-year bonds were down 7 basis points to 3.026%
Canada’s labor force grew by 137,800, more than double the gain in jobs, data showed.
Adding to signs of labor market weakness, the average hourly wage growth for permanent employees slowed to an annual rate of 3.9% from 4.9% in October. The closely watched wage growth rate was the slowest since the 3.9% rate in June 2023.
The BoC has reduced its key policy rate by 125 basis points since June to 3.75%.
The job additions in November were entirely in full-time work that more than offset a small decrease in part-time jobs.
Overall, employment in the goods sector decreased by a net 20,800 jobs, mainly in manufacturing, while the services sector gained a net 71,500 jobs, led by wholesale and retail trade.
The employment rate, or the proportion of the population who are employed, remained at 60.6% in November after falling for six consecutive months, as employment growth kept pace with growth in the population, Statscan said.