Jump in unemployment rate puts Bank of Canada in a ‘tricky spot’. Here’s why

The Canadian unemployment rate jumped up to 6.1 per cent in March amid rapid growth in the labour pool, Statistics Canada said Friday.

Canadian employers collectively shed 2,200 jobs last month but employment was little changed in the month, the agency said.

Canada’s unemployment rate was 5.8 per cent in February.

The spike in the unemployment rate – a full percentage point higher than where it stood a year ago – is tied to an additional 60,000 people looking for work or on temporary layoff in March, StatCan said. Last month the agency reported that, as of Jan. 1, Canada’s annual population growth hit its fastest rate since 1957.

The consensus of economist expectations called for 25,000 jobs gained last month and a more modest increase in the unemployment rate to 5.9 per cent.

Youth aged 15-24 bore the brunt of contraction with 28,000 jobs lost in March.

StatCan said the food and accommodation services, wholesale and retail trade, and professional, scientific and technical industries led job losses in the month, offset by gains in healthcare and social assistance.

Average hourly wages were up 5.1 per cent year-over-year, a slight acceleration from 5.0 per cent in February.

The latest employment data comes days before the Bank of Canada’s next interest rate announcement, which is set for April 10.

The central bank has been looking for signs that the labour market is cooling, and by extension taking some steam out of inflation, as it debates how long to keep interest rates elevated.

BMO chief economist Doug Porter said in a note to clients on Wednesday that while the rising unemployment rate suggests a slackening in the labour market, still-hot wage growth puts the Bank of Canada in a “tricky spot.”

“With productivity barely moving,