The latest employment report from Statistics Canada shows that students looking for summer jobs and newly arrived immigrants searching for work have felt the impact of the weak labor market in the country.

The labor force survey conducted by the federal agency in July, released on Friday, indicates that the overall unemployment rate remained unchanged at 6.4 percent last month as the economy lost 2,800 modest jobs.

The employment rate, which measures the proportion of the population aged 15 and over who are working, dipped slightly as fewer people searched for jobs.

"For the second consecutive month, Canadian employment remained fundamentally unchanged, disappointing expectations for a modest increase of 25,000," wrote TD Chief Economist Leslie Preston in a client note.

Amid historically high interest rates, the unemployment rate has risen by 0.9 percentage points over the past year, and job vacancies have decreased significantly.

However, the latest data indicates that youth and newly arrived immigrants have been among the hardest hit by the deteriorating economic conditions.

Among students aged 15 to 24 returning to school in the fall, 51.3 percent of them were employed last month, a stunning decline of 6.8 percentage points from last year.

Statistics Canada stated that this is the lowest employment rate for returning students since July 1997, excluding July 2020 during the COVID-19 pandemic.

Newly arrived immigrants also felt the slowdown in the Canadian labor market particularly hard, as their unemployment rate rose by 3.1 percentage points year-over-year to 12.6 percent in July.

In comparison, the unemployment rate for Canadian-born individuals increased by 0.5 percentage points over the past year to 5.6 percent for the month.

Brendon Bernard, senior economist at the job site Indeed, noted that youth and newcomers are disproportionately affected by the economic slowdown because employers are hiring fewer workers instead of laying off employees.

Bernard added, "Youth and newcomers to Canada are more cyclically sensitive to labor market fluctuations. But what's also happening is that both groups are experiencing rapid population growth."

The rise in unemployment is particularly stark for young newly arrived immigrants, who are facing an unemployment rate of 22.8 percent. This is up by 8.6 percentage points from last year.

However, it doesn't seem that the declining labor market is affecting wage growth so far, as the average hourly wages continued to grow at a strong pace, rising by 5.2 percent from last year.

Bernard said, "This is good news for those in stable jobs, as they are seeing their wages rise at a fairly strong pace."

"But for those unemployed, this is a kind of cold comfort."

The Bank of Canada indicated that it is increasingly worried about labor market conditions.

Bank Governor Tiff Macklem said last month that the central bank's decision to lower the key interest rate again was partly driven by a desire to stimulate economic growth.

A summary of the Bank of Canada's deliberations released earlier this week noted that some members of the Governing Council are concerned that further deterioration in the labor market could hinder this process.

Andrew Grantham, a senior economist at CIBC, wrote: "Last month's Bank of Canada monetary policy decision minutes highlighted the growing concern about the state of the labor market, and today's data will not do much to ease those worries even as the unemployment rate remains stable."

Grantham states that CIBC expects three more interest rate cuts this year, one at each upcoming decision. The bank is set to make its next interest rate decision on September 4.

The Bank of Canada's key interest rate currently stands at 4.5 percent, a level that is still expected to constrain economic growth.

However, the central bank has indicated that it plans to continue lowering interest rates as long as inflation continues to slow.