Canada’s economy unexpectedly shed a net 2,200 jobs in March, largely in the services sector, while the jobless rate increased to a new 26-month high of 6.1 per cent, data showed on Friday.

The weak jobs data spurred money markets to increase their bets for a June rate cut, although they still expect a hold from the Bank of Canada (BoC) at its next announcement on Wednesday.

Analysts polled by Reuters had forecast a net gain of 25,000 jobs and the unemployment rate to rise to 5.9 per cent from 5.8 per cent in February.

With the 0.3 per cent percentage point rise - the biggest jump since August 2022 - the unemployment rate is the highest since the 6.5 per cent recorded in January 2022. Before the COVID-19 pandemic, Canada’s jobless rate was last as high as 6.1 per cent, in November 2017.

The average hourly wage growth of permanent employees, however, accelerated to an annual rate of 5.0 per cent from 4.9 per cent in February, Statistics Canada said.

Canada recorded a bigger-than-expected trade surplus of C$1.39 billion ($1.03 billion) in February as a record level of unwrought gold helped exports outpace the rise in imports, data showed.

Analysts polled by Reuters had forecast a C$800 million surplus in the month. The trade balance in January was upwardly revised to C$608 million from a surplus of C$496 million initially reported.

Total exports rose 5.8 per cent to C$66.62 billion ($49.43 billion), marking the fastest growth since August, while imports increased 4.6 per cent to their highest level since June, Statistics Canada said. The jump in exports was primarily led by a sharp rise in outward shipments of unwrought gold. Excluding that product category, total exports were up 2.8 per cent.

Increased high-value shipments of refined gold, as well as transfers of gold assets in the banking sector, also were observed in February, Statscan said.

Meanwhile the growth rate of wages - closely tracked by the central bank because of its effect on inflation - accelerated for the first time in three months.

South of the country’s border, US jobs data came at the same time as Canada and surprised to the upside, adding 303,000 jobs in March against a forecast of 200,000 jobs, signaling continued economic strength in the country.

Analysts and economists have said that the BoC is likely to lead the Fed in rate cuts since, despite some recent strong numbers on the GDP front, the US economy has been showing signs of weakness and inflation has cooled considerably.

“While markets had been pushing back expectations for a first Bank of Canada interest rate cut following strong GDP data to start the year, today’s labour force data should see them pulling those expectations forward,” Andrew Grantham, senior economist at CIBC, wrote in a note.

Money markets increased their bets for a rate cut in June to close to a 76 per cent probability from 67 per cent before the numbers were released.

The Canadian dollar extended losses to trade 0.58 per cent lower at 1.3620 to the US dollar, or 73.42 US cents, at 1240 GMT. The two-year government bond yields fell by 2 basis points to 4.164 per cent.

The BoC has repeatedly stressed that it would only start considering reducing borrowing costs when it is sufficiently certain that inflation was on its path to meet the bank’s 2 per cent target.

“Today’s evident weakening in the labour market only makes it tougher for policymakers to uphold a wait-and-see attitude, and this really opens the door for a strong dovish pivot by the BoC that hints toward a rate cut in June,” said Kyle Chapman, FX Markets Analyst at Ballinger Group.

Friday’s jobs report is the last major data to be released before the BoC’s next rate announcement on Wednesday, when the central bank is expected to keep its key policy rate on hold at a 22-year high of 5 per cent.

Employment in the goods sector increased by a net 29,900 jobs, mostly in construction, while the services sector lost a net 32,00 jobs, led by the accommodation and food services and wholesale and retail trade sectors.

Overall, this was the first jobs decline in eight months, and were led by part-time work.

The employment rate, or the proportion of the population aged 15 and older who are employed, declined for the sixth consecutive month to 61.4 per cent in March, as jobs growth continued to be outpaced by the rise in population.

Canada’s population increased at an annual rate of 3.2 per cent as of Jan. 1, 2024, the fastest annual growth rate since 1957, according to Statscan data.