tariff decrees bring hiring freeze

Canada shed almost 33,000 jobs in March, which was the single largest monthly decline in national employment since January 2022 (when public health measures related to a wave of COVID-19 caused a temporary spike in unemployment). This follows four months of relative labour market stability that had resulted in job gains and a falling unemployment rate. The national unemployment rate rose marginally last month, to 6.7%, from 6.6% in February.

This reversal of recent trends in the labour market is likely impacted by the ongoing trade dispute between the United States and Canada (which has since been expanded to almost every country in the world). The implementation of some tariffs in March, along with the persistent threat of additional tariffs have wreaked havoc on consumer and business confidence (consumer confidence is now lower than it was in March 2020). With so much uncertainty swirling around, it makes sense then that businesses are investing less, including in people, until they get more clarity.

The job losses in March were concentrated in provinces with relatively high exposure to US tariffs. Ontario had by far the largest drop in employment, where the auto sector was bracing for the implementation of tariffs on Canadian manufactured cars entering the US. The integrated nature of the North American auto industry also left much uncertainty about what tariffs would be applied to cars made up of both American and Canadian parts. Alberta also suffered from elevated job losses in March. The vast majority of Alberta’s exports are in energy, which had been slated to be tariffed at a lower rate (of 10%). However, Alberta is far more reliant on the US as an export destination than other provinces. Here in BC we added 5,700 jobs last month, as we are comparatively less exposed with a lower share of our exports heading to the US.

With the US announcing additional tariffs on April 2nd on virtually every country on earth of at least 10% (and in many cases, much higher) excluding CUSMA compliant goods, the impacts will be far reaching, including here in Canada. The March jobs data are likely a harbinger of what’s to come, as tariffs raise prices and suppress demand for goods, both in the US and elsewhere as counter-tariffs are imposed. Expect unemployment to grow in the near-term. The Bank of Canada will have its hands full as it tries to keep inflation low—it rose most recently in February—in a slowing economy. Today’s jobs data increase the likelihood of a cut from the Bank of April 16th, but they will proceed with caution as the landscape for global trade evolves.