Canada's unemployment rate edged up to 6.6 per cent in August, scaling a peak last seen more than seven years ago excluding the pandemic years of 2020 and 2021, data showed on Friday.
The economy added a net 22,100 jobs in August, fully driven by part-time employment, Statistics Canada said.
Analysts polled by Reuters had forecast a jobless rate of 6.5 per cent and net job additions of 25,000 in August.
The Canadian dollar strengthened to C$1.3467 to the U.S. dollar, or 74.26 U.S. cents, up 0.3 per cent on the day.
Canada's economy had been losing steam under the pressure of high interest rates, and most of the growth seen earlier in the year was primarily led by increase in population.
But as GDP growth has lagged population growth, unemployment has crawled up, stoking fears of a recession.
Canada's unemployment rate has risen by 1.6 percentage points since January 2023, which some economists have called alarming and pressed for deeper rate cuts to prop up growth.
The rise in unemployment was largest amongst the youth aged 15 to 24 on a year over year basis and the rate of joblessness this summer amongst them was highest in eight years.
The Bank of Canada this week trimmed its key policy rate by 25 basis points to 4.25 per cent, its third such move in a row and Governor Tiff Macklem said that deeper rate cuts could be implemented if the economy needed support.
Slow employment growth was one of the reasons that could temper robust GDP growth projections for the third quarter, he said during his remarks.
Financial markets trimmed their expectations of a rate cut in October to 93 per cent from 98 per cent before Friday's announcement. Traders are fully pricing in two 25 basis point rates cut by December. 0#BOCWATCH
The employment rate, or the number of people with jobs out of the total working age population of 15 years and older, has been steadily falling and hit 60.8 per cent in August, Statscan said. It has fallen in 10 out of the last 11 months.
The average hourly wage growth of permanent employees slowed to an annual rate of 4.9 per cent in August from 5.2 per cent in July, the statistics agency said. The wage growth figure, which has been partly responsible for keeping inflation high, is closely watched by the BoC.
(Reporting by Promit Mukherjee. Editing by Dale Smith, David Ljunggren, Philippa Fletcher)