Canada's unemployment rate rose to 7.1% in August, the highest level since May 2016, according to data released last week. This increase coincides with a 1.6% annualized decline in second-quarter GDP, a sharp 7.5% drop in exports, and a 9.4% plunge in business investment. In response, Canada's Prime Minister has activated a C$5 billion (approximately HK$28.2 billion) strategic response fund to support industries severely impacted by the U.S. tariff war.
The latest statistics from Statistics Canada show a loss of 66,000 jobs in August, with the proportion of unemployed in the total labor force continuing to rise throughout the year. Employment has declined across many sectors, particularly those hardest hit by the tariff war. For example, the transportation and warehousing sector lost 23,000 positions, while manufacturing shed 19,000 jobs. The scientific and technical services sector was also severely affected, with a sharp decline of 26,000 jobs. The ongoing uncertainty in U.S. trade policy has eroded confidence among Canadian businesses, leading to widespread reductions in hiring and investment, thereby weakening both the job market and economic growth momentum.
Federal Departments Ordered to Prioritize Domestic Procurement
Most of the job losses in August were part-time or short-term positions, with the majority of the unemployed being workers aged 25 to 54. Youth employment difficulties remain unchanged. Economist Antunes described the August employment report as broadly negative, expressing particular concern that the job losses were concentrated among the core working-age population, creating uncertainty and anxiety in the labor market. Gen Z job seekers and recent graduates report extreme difficulty finding work, with many having applied for hundreds of jobs without success. A recent report by financial services group Desjardins highlights that the rise of the gig economy, artificial intelligence, and a rapidly growing young immigrant population are key factors worsening employment prospects for young workers.
To support industries heavily impacted by the tariff war, Prime Minister Trudeau has ordered federal departments and public institutions to prioritize the procurement of Canadian products, aiming to mitigate the effects of U.S. tariffs on lumber, automobiles, steel, and aluminum. Trudeau stated that the federal government will use public funds to purchase domestic products, supporting local businesses to continue operations. The Canadian Steel Producers Association noted that domestic production could replace over 80% of imported steel. In support of the local automotive industry, Trudeau announced a suspension of the originally planned target for electric vehicles to make up 20% of sales next year. He emphasized that Canada's ultimate goal is to achieve 100% zero-emission electric vehicle sales by 2035. However, in light of recent U.S. tariffs on automobiles, steel, aluminum, copper, and other industries, the government must assess the impact of the tariff war on various policies to balance environmental commitments with maintaining economic competitiveness.
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