Canada’s job market took an unexpected turn in September, shedding 68,300 jobs and pushing the unemployment rate up to 6.5%. The losses came after an earlier decline of 41,700 jobs in August, effectively erasing all employment gains for the year. Analysts had anticipated a modest increase of 9,200 jobs, but the reality proved far more challenging. The unemployment rate matched expectations at 6.5%, up from 6.4% in August.
The job losses were not concentrated in U.S.-facing industries, despite new tariffs from the United States. Instead, the biggest declines occurred in the public sector, particularly in educational services and healthcare, which together lost 58,400 jobs. The manufacturing sector, partially exposed to the U.S. market, saw a net loss of 12,700 jobs. Economists noted that the new tariffs are unlikely to have a major impact on future employment data.
The labour force participation rate fell to 64.8%, its lowest level in 29 years outside the pandemic era. This decline was attributed to an aging population and slower immigration rates. Employment among youth aged 15 to 24 dropped by 48,000, further contributing to the shrinking labour force. The average hourly wages for permanent employees rose to 2.3% year-over-year in September, up from 2% in August.
Following the release of the jobs report, the Canadian dollar weakened, trading down 0.44% against the U.S. dollar. Yields on two-year government bonds also declined, reversing early gains. The September employment report comes ahead of the Bank of Canada’s monetary policy decision at the end of the month, with markets currently pricing in no rate hike in October but expecting a 25 basis point hike in December.