Canada’s labor market faced another challenging month in September, with a significant decline in jobs and a rising unemployment rate. According to Statistics Canada’s latest Labour Force Survey, employment fell by approximately 68,000 jobs, pushing the national unemployment rate up to 6.5 percent from 6.4 percent the previous month. This decline follows a loss of over 40,000 jobs in August, reflecting the ongoing impact of the U.S.-Canada trade war on the economy.
The public sector was the hardest hit, with all job losses concentrated in this area. Sal Guatieri, Senior Economist at BMO Capital Markets, described the report as “quite disappointing” but noted that the job losses in the public sector reduced the severity of the report. Over half of the job losses in September came from the educational services sector, attributed to immigration curbs that have forced some colleges and schools to lay off workers.
Sébastien Mc Mahon, chief economist at iA Financial Group, noted that the public sector job losses were not entirely unexpected, given the federal government’s pledge to cut the federal workforce by 4.5 percent, or 16,000 jobs, within three years. He also highlighted the resilience of Canada’s economy despite the trade tensions, pointing to solid momentum in hours worked and trade outside the U.S.
The manufacturing sector, heavily exposed to the trade war, saw a net loss of 13,000 jobs. Economists agree that the weak jobs report makes an interest rate hike by the Bank of Canada highly unlikely at its next policy decision later this month. Money markets also do not expect a rate hike at the October 28 meeting, though traders are pricing in a slight chance of a 25-basis-point increase at the bank’s last meeting of 2026 in December.