Canada’s job market experienced an unexpected downturn in September, with a net loss of 68,300 jobs, wiping out all employment gains made earlier this year. This decline follows an earlier drop of 41,700 jobs in August, as reported by Statistics Canada. The unemployment rate rose slightly to 6.5% from 6.4% in August, marking the first full month after the latest round of US tariffs took effect against Canada. However, the most significant job losses occurred in the public sector, particularly in healthcare, social assistance, and education, due to reductions in international student permits.
Analysts had anticipated a job increase of 9,200 and an unchanged unemployment rate, making the actual results a surprise. The year-to-date net job loss now stands at 41,200, a stark contrast to the 211,300 jobs gained in the same period of 2025. Job losses were nearly evenly split between full-time and part-time positions, with manufacturing, partly affected by US tariffs, losing 12,700 jobs. Economists suggest that the new tariffs are unlikely to significantly impact employment data in the near future.
The Bank of Canada is no longer expected to raise interest rates this month, though a 25-basis-point hike is still anticipated for December. Royce Mendes, head of macro strategy at Desjardins, noted that the recent labor market deterioration will likely keep rates unchanged for now. However, he expects rising energy prices to contribute to inflation, potentially forcing policy tightening soon. The labor force participation rate fell to its lowest level in 29 years, excluding the pandemic, driven by an aging workforce and slower immigration.
Employment among young people aged 15-24 dropped by 48,000 in September, following a smaller decline in August. Meanwhile, the growth in average hourly wages for permanent employees accelerated to 2.3% year over year, up from 2.0% in August. The Canadian dollar weakened after the report, falling 0.44% to 69.99 US cents, while bond yields dropped 9.5 basis points to 2.410%.