Canada experienced a setback in its labor market during August, shedding 42,000 jobs, as per Statistics Canada. This decline caught some economists off guard, as they were anticipating a fourth consecutive month of job gains since May. The unemployment rate remained stable at 6.4% for the month.
Data from the latest Labor Force Survey revealed a decrease of 20,000 public sector jobs, marking the third consecutive month of decline, while private sector employment remained relatively unchanged. The manufacturing sector was a highlight in August, adding 22,000 jobs, whereas sectors such as public administration, natural resources, and utilities saw decreases in employment.
CIBC chief economist Andrew Grantham noted that only the manufacturing sector experienced a significant increase in employment in August. This trend aligns with other economic indicators, suggesting a slowdown in the economy in the third quarter, following a robust second quarter, amidst heightened uncertainty surrounding U.S. trade relations.
Quebec was the most impacted region, losing 19,000 jobs, followed by Ontario with an 18,000 job loss. Bank of Montreal chief economist Douglas Porter mentioned that after a series of strong job reports, a softer report was anticipated, indicating a reality check rather than a surprise.
According to Statistics Canada, average hourly wage growth in August was the slowest in nearly nine years, with a two percent annualized increase, down from 2.8% in July and 3.3% in June. A Reuters poll had predicted a gain of 15,000 jobs in August, with the unemployment rate expected to remain at 6.4%.
The recent job data interrupts a streak of monthly gains, with the Canadian economy adding 75,000 jobs in July and 181,000 jobs between April and July. The ongoing trade tensions between Canada and the U.S., with recent tariffs imposed, have added to the economic uncertainties affecting various industries.
Statistics Canada highlighted that industries reliant on U.S. export demand continue to face an uncertain economic environment, with higher layoffs compared to other sectors over the past year. The agency mentioned that the share of Canadian exports destined for the U.S. has been gradually decreasing, standing at 66% in July 2026.
Meanwhile, south of the border, the U.S. Labor Department reported an addition of 162,000 jobs in August, with revisions to June and July figures adding a combined 55,000 jobs. The U.S. unemployment rate remained steady at 4.1%. President Donald Trump celebrated the positive job numbers and urged the Federal Reserve to lower interest rates.
As Canada navigates economic challenges, many economists expect the central bank to maintain its policy rate at 2.25% for the remainder of the year, in contrast to potential rate adjustments in the U.S.