As the labor market cools, newcomers and young people are hit the hardest

Bank of Canada Governor Tiff Macklem says the path back to the 2 percent inflation target appears to be smooth, but the consequences of a cooling labor market remain.

His comments came a few weeks after the central bank cut interest rates for the first time in four years.

The unemployment rate rose to 6.2 percent through May, up from 4.8 percent in July 2022. Also, the increase in unemployment has been accompanied by a decrease in vacant jobs and a rapid increase in population.

The economy appears to have slowed enough to continue adding jobs without jeopardizing the path back to the 2 percent inflation target, McClam said Monday.

He noted that the unemployment rate for newcomers to Canada hit 11.7 percent in May, more than double the rate for the rest of the population (5.7 percent).

This is the case for many young Canadians, including recent graduates. The unemployment rate for 15- to 24-year-olds is 12.7 percent, well above the 5.2 percent rate for 25- to 54-year-olds, and two percentage points higher than the pre-pandemic average.

As employers are hiring less, it's becoming more difficult for people to find jobs, which hurts newcomers, young people and graduates the most, Macklem explained.

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