Unemployment in Canada could reach 7% or even higher by the end of the year, warns National Bank Chief Strategy and Economics Officer Taylor Schleich. That would happen if the Bank of Canada does not cut its interest rate soon.

The labour market is “gasping for air,” Schleich said, noting that it cannot be ignored by focusing solely on fighting inflation.

“We believe a July rate cut is the most likely outcome because the disastrous consumption index in June leaves the Bank of Canada with no choice,” the economist said. “While May’s inflation levels were not ideal, we do not think it is prudent to ignore the overall situation where unemployment is rising despite improving inflation numbers.”

In his view, labour market dynamics continue to deteriorate at the moment, reflecting the central bank’s short-sighted policies.

Yuri B