Canadian employment stumbles again with loss of 68,000 jobs in September

Canada’s labour market stumbled in September, posting a second consecutive monthly decline and reinforcing forecasts that the Bank of Canada will hold interest rates steady later this month.

Employment fell by 68,000 in September, adding to a loss of 42,000 jobs in August, Statistics Canada reported on Friday. The unemployment rate nudged up to 6.5 per cent from 6.4 per cent.

The economy has faced serious headwinds over the past couple years, most notably tariffs imposed by the United States. The trade war has intensified with the introduction of new tariffs in recent weeks and negotiations between Ottawa and Washington have been suspended since August.

“A second consecutive month of sizable job losses washes away the surprising strength reported in Canada’s job market through the early summer,” said Douglas Porter, Bank of Montreal’s chief economist, in a research note.

“On balance, we continue to believe that the appropriate stance by the Bank of Canada is watchful waiting, particularly so with employment suddenly clouding over.”

The Bank of Canada is widely anticipated to resume raising interest rates in the coming months, with several hikes expected by next summer.

The U.S. Federal Reserve raised interest rates in September for the first time this year. Central bankers are wary of how higher energy prices resulting from the Iran war could feed into more widespread inflation.

The Bank of Canada’s key interest rate is 2.25 per cent, and its next decision is on Oct. 28.

Friday’s jobs report showed that the biggest decline last month was in the public sector, where there was a loss of 70,000 positions, with half of those attributed to education services in Quebec. This is the fourth consecutive month showing a decline in the public sector, which is down 119,000 jobs year-over-year.

Health care and social assistance also saw their first monthly decrease since December, 2022, while September also saw a decline in manufacturing.

The loss in the manufacturing sector may be, according to Mr. Porter, “an early warning of the weight from the amped-up trade tussle.”

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Regionally, Quebec saw the biggest drop in employment at 49,000 jobs, with British Columbia and Ontario following with a loss of 20,000 jobs apiece, and 4,400 job losses in Manitoba. In comparison, Alberta saw an increase of 23,000 last month. Newfoundland and Labrador and Prince Edward Island also saw job gains.

Andrew Hencic, a senior economist at Toronto-Dominion Bank, said in a note to clients that the unemployment rate is expected to “tread water in coming months, as trade frictions and higher [interest] rates weigh on activity.”

Mr. Hencic added that the one positive takeaway from Friday’s report was a steady employment rate in the private sector.

The jobless rate for women between the ages of 25 and 54 rose to 5.3 per cent from 5 per cent both because fewer women in this cohort were working, and more were actively searching for a job. The unemployment rate for men in the same age bracket fell slightly to 5.8 per cent.

Employment for youth aged 15 to 24 declined by 48,000 jobs in September for a second consecutive monthly loss, although the rate remained little changed at 13 per cent.

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Royce Mendes, head of macro strategy at Desjardins, said in a research note that the slight increase in the unemployment rate “could have been worse, were it not for a drop in the participant rate to its lowest level in almost 30 years.”

The labour participation rate – the proportion of the population aged 15 and above that is working or actively looking for work – fell to 64.8 per cent, the lowest level since December, 1997, excluding the early parts of the pandemic. The agency attributed this trend to aging demographics, though more recently, the country’s population growth has been meagre after strong immigration from 2022 to 2024.

“Overall, the decline in employment and hours worked, combined with the increase in the unemployment rate, point to a shift in economic momentum. After a solid first half of the year, it looks like economic activity has cooled off,” Mr. Mendes added.