A surprise 42,000-job loss in August puts the Bank of Canada's October rate decision back in play
Canada's labour market reversed course in August, shedding 42,000 jobs as new US trade duties begin registering in the employment data ahead of the Bank of Canada's (BoC) October 28 rate decision.
Statistics Canada reported Friday that the unemployment rate held at 6.4% for a second consecutive month, but that headline stability masked a broad deterioration in conditions.
Full-time positions fell 35,900 while part-time employment declined by a further 5,800, reversing the momentum built during Canada's surprisingly strong July labour market, which had added 75,100 jobs in a single month.
Services sector bears the brunt
The public sector shed 20,000 positions, marking its third consecutive monthly decline.
Regional losses were concentrated in Quebec, which lost 19,000 jobs, and Ontario, which shed 18,000.
Service-producing industries — employing approximately four out of every five Canadians in the labour force — fell by 51,500 positions, led by declines in business, building and support services and wholesale and retail trade.
Manufacturing was the lone sector to record meaningful gains, adding approximately 22,000 jobs, a 1.2% month-over-month increase.
Year-over-year, the economy added 217,000 positions, a 1% gain, led by health care and social assistance, information, culture and recreation, and transportation and warehousing.
October rate decision comes into focus
The August report lands in the immediate wake of the US tariff escalation that has clouded the Bank of Canada's rate outlook throughout 2026.
Washington imposed 50% duties on approximately $28 billion worth of Canadian goods in August; Canada has matched those levies with dollar-for-dollar tariffs on $27.6 billion of comparable US products this week.
Ottawa also deployed a $7.5-billion expanded relief package for affected workers and businesses, on top of the roughly $25 billion in trade supports introduced over the previous 18 months.
The Bank of Canada has held its overnight rate at 2.25% for the 7th straight time.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 3, 2026
Experts say rising bond yields, tariff uncertainty, and shifting fixed vs. variable mortgage rates are changing the outlook for Canadian borrowers this fall.https://t.co/seMfnFJAxL
Speaking on Wednesday, Bank of Canada Governor Tiff Macklem described the new duties as "very steep" while noting they apply to a "relatively narrow" selection of goods.
The Bank of Canada's September 2 rate decision confirmed a seventh consecutive hold at 2.25%, but August's data shifts the calculus heading into October 28.
Joel Fox, chief operating officer at Ownright in Canada, said at the time of the September hold that if inflation kept easing while the economy remained weak, "we could see a rate cut later this year."
Average hourly wages for permanent employees fell to 2% year-over-year in August, down from 3% the prior month and the softest reading in more than seven years outside of the pandemic.
Youth unemployment climbed 0.3 percentage points to 12.9%, reversing a declining trend sustained from April through July, while the labour force itself contracted for the first time since February.
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