Toronto's unemployment rate is at its highest point since the COVID-19 pandemic. Here is where experts say the job market is headed

A woman checks out a jobs advertisement sign during the COVID-19 pandemic in Toronto on Wednesday, April 29, 2020. THE CANADIAN PRESS/Nathan Denette

Nearly 380,000 Torontonians were searching for a job in November as the city’s unemployment rate reached a level not seen since the COVID-19 pandemic.

The data, released by Statistics Canada earlier this month, showed that approximately 379,000 Torontonians were looking for jobs in November equating to an unemployment rate of 8.1 per cent.

It is the highest Toronto’s unemployment rate has been since January, 2022 when many COVID-19 restrictions were still in place.

The 8.1 per cent of residents who are unemployed also puts Toronto’s jobless rate among the highest in Ontario, behind only Windsor at 8.7 per cent.

Ontario’s unemployment rate as a whole in November was 7.6 per cent.

"What's happening in Toronto is similar to what's happening across Canada and that was the deliberate plan of the Bank of Canada when they started increasing interest rates back in 2022," Jim Stanford, Economist and Director of the Centre for Future Work, told CTV News Toronto in an interview. "Their judgement was that unemployment was too low at that point in time and they wanted to have a bigger cushion of unemployed workers as a way of bringing down wage demands and inflation. So, what's happening in Toronto is not unique."

Toronto’s jobless rate has risen by 1.5 per centage points over the last year, exceeding the growth in Canada’s unemployment rate which is up one point to 6.8 per cent during the same time frame.

The city and country has been adding jobs but not enough to keep up with the rising population.

Interest rates and immigration playing a role

Meanwhile, a rapid rise in interest rates have cooled hiring in some sectors, even as the Bank of Canada moves to bring rates to a more neutral level.

"Businesses are hiring less," Graham Dobbs, Senior Economist with The Dais at Toronto Metropolitan University, told CTV News Toronto. "We've had heightened interest rates for a long time now and businesses are not taking as many risks in hiring additional workers. We've now seen interest rates decline, but these are things that have happened very recently and I'm sure a lot of businesses are still recovering from those high costs to borrow."

Statistics Canada has said that Canada’s unemployment rate has generally been on an uphill climb since April, 2023.

But it's not just interest rates impacting unemployment levels in Toronto and elsewhere. Stanford says immigration also plays a role.

"One of the reasons why unemployment has increased in Canada, and Toronto as well, has been a very rapid increase in our population driven by immigration, both permanent and temporary. Put all that together, and we have a situation where the overall labour supply has been growing more than the number of jobs available,” he said.

Koula Vasilopoulos, who is the senior managing director at the employment agency Robert Half Canada, agrees.

"A lot of newcomers have moved to Toronto in the last few years. It's a great city with great infrastructure that is attracting a record number of people to the city to work,” she said.

Stanford also told CTV News Toronto that while the federal government is starting to unwind some of their big expansion in immigration, the labour force won't be immediately impacted, similar to the drop in interest rates.

"It will not have an immediate effect, but it will mean that the population will grow slower in the next couple years, and I think that will lead to lower unemployment and a slightly better balance in the labour market."

Youth unemployment rising

Experts say youth unemployment is another contributing factor.

StatsCan said in November, nearly half (46.3 per cent) of unemployed people had either not worked in the last year or had never worked all together.

"There is a real shortage of job opportunities for those looking for full-time and entry into the labour market," Dobbs said. "That's particularly heightened among youth who are just coming out of school and looking for something to start their careers."

The November numbers revealed the youth unemployment rate was up 2.3 percentage points on a year-over-year basis, making it the largest increase among the major age groups.

Earlier this year, one new graduate told CTV News Toronto they had applied to over 400 applications before landing a role.

"We saw more people searching for jobs in November and some of those were people who were not previously in the job market," Vasilopoulos told CTV News Toronto.

"It's been a combination of youth, those finishing post secondary educations, newcomers, and individuals who simply just want to restart their job search."

'Funny combination' in the labour force

Despite the rise in unemployment, StatsCan said the economy added 51,000 jobs in November, with the majority of those concentrated in full-time work.

Overall, Stanford says that Canada's job market is in a "funny" spot, noting the unemployment rate and job gain send opposite signals.

"There are two reasons why the unemployment rate could increase. It could be that the number of jobs shrink, but that hasn't happened in Canada. In fact, employment in Canada has continued to grow, just not fast enough to keep up with the population," Stanford told CTV News Toronto.

"The other reason is because the supply of workers looking for a job has grown, and that is what has been happening in Canada. So, we've had the funny combination of growing employment and growing unemployment at the same time."