Finding work has become increasingly challenging for Canadian jobseekers as a weakening economy and high interest rates push business owners to rein in hiring.

Statistics Canada’s latest labour force survey Friday showed the economy added 27,000 jobs last month – too modest of a gain to keep the unemployment rate from rising by a tenth of a percentage point to 6.2 per cent.

The report, which came in largely as forecasters had expected, suggests the Canadian labour market is trudging along but struggling to meet the needs of a growing number of jobseekers. 

"The main numbers were returning to a familiar trend: the Canadian job numbers eking out a decent overall headline gain, but not matching population growth," said Brendon Bernard, a senior economist with hiring site indeed. 

"And that's showing up in a rising unemployment rate, which, at 6.2 is not particularly low anymore."

Economists were taken by surprise in April when employment jumped by 90,000 — the largest monthly increase since January 2023.

But the May employment data suggests the job market is back on trend. 

"It didn't take much digging to unearth the fact that this report is considerably softer than the headline, as all of the gains were in part-time jobs, in one province (Ontario), and the unemployment rate ticked up to 6.2 per cent, as expected," wrote BMO chief economist Douglas Porter in a client note.

Of those who were unemployed in April, just under a quarter found work the next month, the report said. That’s below the pre-pandemic average of 31.5 per cent for the same months in 2017, 2018 and 2019.

“A lower proportion of unemployed people transitioning into employment may indicate that people are facing greater difficulties finding work in the current labour market,” the report said.

More Canadians are also finding themselves working part-time because they don’t have better options.

Statistics Canada said the involuntary part-time rate, which refers to the proportion of part-time workers who could not find full-time work or worked part-time because of weak business conditions – was 18.2 per cent in May. That’s up from 15.4 per cent a year prior.

Young people have also felt the consequences of the job market slowdown. The report notes that for returning students aged 20 to 24, their employment rate was down 2.9 per cent from a year ago.

"Over the past year, we've seen that youth employment conditions have really taken a hit," said Bernard.

Youth have been particularly affected by weaker hiring trends because they tend to go in and out of the labour market, he explained. 

Bernard said strong population growth among people aged 25 and under is also contributing to weaker employment among youth. 

Meanwhile, U.S. employers added a strong 272,000 jobs in May, accelerating from April and a sign that companies are still confident enough in the economy to keep hiring despite persistently high interest rates.

The data from both Canada and the U.S. come two days after the Bank of Canada opted to lower interest rates for the first time in four years, citing easing inflation and the weakening economy.

The central bank lowered its key interest rate by a quarter of a percentage point to 4.75 per cent and signalled that more rate cuts would be on the way, so long as inflation continues to slow.

"Taken together, this mixed bag doesn't really move the needle on the Bank of Canada rate-o-meter. It's still consistent with growing slack in the economy, albeit with sticky wages," Porter wrote.

Wage growth remained strong in May as average hourly wages rose 5.1 per cent from a year ago, reaching $34.94.

Employment was up in health care and social assistance, finance, insurance, real estate, rental and leasing, business, building and other support services as well as accommodation and food services.

Meanwhile, employment fell in construction, transportation and warehousing and utilities.

This report by The Canadian Press was first published June 7, 2024.