FILE PHOTO: A help wanted sign hangs in a bar window along Queen Street West in Toronto Ontario, Canada June 10, 2022. REUTERS/Carlos Osorio/File Photo

By Promit Mukherjee

OTTAWA (Reuters) -Canada's unemployment rate in May jumped to its highest level in almost nine years, excluding the peak of the COVID-19 pandemic, with 1.6 million jobless people in the country, data showed on Friday.

The unemployment rate ticked up to 7% in May from 6.9% in April, a third consecutive monthly increase, Statistics Canada said, adding that the total of jobless people in May was almost 14% higher than a year ago.

This level of unemployment was last seen in September 2016 after the COVID-era unemployment numbers of 2020 and 2021 are excluded, StatsCan said.

"People are facing greater difficulties finding work in the current labor market," it said.

However, the one-tick rise in the unemployment rate was primarily driven by almost flat employment growth even as the population increased. There were no mass layoffs which indicates that while hiring is low, the labor market is not in a dour state.

The total number of people employed grew by a slim 8,800. The employment number has a standard error margin of 32,000.

Analysts polled by Reuters had forecast the unemployment rate to be at this level due to the impact of U.S. tariffs on Canada. They had estimated the total employment number would drop by 12,500.

The Canadian dollar traded up by 0.04% to 1.3667 to the U.S. dollar, or 73.17 U.S. cents. Bond yields on the two-year government bonds were up 4 basis points to 2.672%.

Currency swap market bets show odds of a 25 basis point rate cut in July at just 33%.

Economists expressed relief, as U.S. tariffs on Canada were in effect in May.

"On the surface it seems like a stable situation," said Doug Porter, chief economist at BMO Capital Markets.

"It is early days to judge," Porter said of the tariff impact, and added that only two sectors were mainly dealing with tariffs - automobiles and metals.

Trump imposed tariffs in March on a variety of Canadian products, followed by duties on steel and aluminum, and later in April on automobiles. These have already led to fewer job additions and some layoffs.

The duration of unemployment has been consistently rising, with jobless people spending an average of 21.8 weeks searching for work last month, up from 18.4 weeks a year ago.

The average hourly wage growth of permanent employees, a metric closely watched by the Canadian central bank to gauge inflationary trends, was unchanged at 3.5% in May.

The employment number was driven by an increase in wholesale and retail trade, a part of the services sector, but was offset by a drop in manufacturing and temporary government jobs reflecting the expiration of election-related temporary hiring.

Economists said one good sign in the job report was that there were around 57,700 additions in full-time employment. However, that was largely offset by a loss of 48,800 people in part-time jobs.

(Reporting by Promit Mukherjee; Additional reporting by Divya Rajagopal and Fergal Smith in Toronto; Editing by Dale Smith, Barbara Lewis and Andrea Ricci)