Unemployment raise rise for the 3rd consecutive month

With another Bank of Canada rate announcement scheduled for the first week of September, it’s important to understand some of the other factors besides inflationary tracking that influences the decision to raise, lower, or hold interest rates.

We have seen Canada’s unemployment rate slightly increase three consecutive months in a row, whilst job creation struggles to keep up amid an increasing population.

Although we don’t want to see people lose jobs, or Canadians struggling to find employment, an increasing unemployment rate is an indicator of economic softening. It helps us understand how our current economic conditions (or higher interest rates) are affecting business practices.

More so, unemployment directly affects households’ disposable income, which will further impact the economy’s output. With less disposable income, we could expect to see a cascading effect ripple through the economy as businesses scale and revenues decline. With this, it would be expected that inflationary numbers also continue to decline.

So although it may seem that the Bank of Canada focuses heavily on inflationary objectives when making decisions about rate increases, there are many different aspects of our economy that play a part in their decision and projection for the future.

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