Canada’s job market experienced a setback in August, shedding 42,000 jobs, according to Statistics Canada. This decline was unexpected, as economists had anticipated a fourth consecutive month of job growth since May. The unemployment rate remained unchanged at 6.4%.
The latest Labour Force Survey revealed a decrease of 20,000 public sector jobs, marking the third consecutive month of decline, while the private sector saw minimal change. In a positive turn, the manufacturing industry added 22,000 jobs in August, offsetting declines in sectors such as public administration, natural resources, and utilities.
CIBC chief economist Andrew Grantham noted that manufacturing was the only sector to show a significant employment increase in August. This trend aligns with other indicators, suggesting a slowing economy in Q3 following a robust second quarter, amid heightened uncertainty surrounding U.S. trade.
Quebec experienced the most significant job losses, with 19,000 positions cut, followed by Ontario with an 18,000 job decline. Bank of Montreal chief economist Douglas Porter commented that the recent job report, while softer, was not surprising given Canada’s previous strong job growth streak.
Statistics Canada reported that average hourly wage growth in August reached its slowest pace in nearly nine years, with a two percent annualized growth rate compared to 2.8 percent in July and 3.3 percent in June. A Reuters poll had projected a job addition of 15,000 in August, with the unemployment rate expected to remain at 6.4%.
The recent job data ends a series of monthly gains, with the Canadian economy adding 75,000 jobs in July and a total of 181,000 jobs from April to July. These developments occur amidst ongoing trade tensions between Canada and the U.S., with recent tariff actions affecting various industries.
To support impacted workers and businesses, the federal government introduced a $7.5 billion expanded economic relief program, in addition to the approximately $25 billion in tariff assistance implemented over the past 18 months. Industries reliant on U.S. export demand continue to face economic uncertainty, with Statistics Canada highlighting higher layoff rates in these sectors over the past year.
Scotiabank economist Mitch Villeneuve noted a gradual decrease in the share of Canadian exports destined for the U.S., with a shift towards non-U.S. markets, particularly Europe. Meanwhile, Bank of Canada Governor Tiff Macklem acknowledged the impact of recent U.S. tariffs but emphasized their limited scope.
In contrast to Canada’s job market, the U.S. reported job gains in August, with American employers adding 162,000 jobs. The U.S. unemployment rate remained steady at 4.1%. President Trump lauded the job numbers, hinting at potential Federal Reserve interest rate adjustments and trade actions if his demands were not met.
Despite global economic uncertainties, many economists expect the Bank of Canada to maintain its policy rate at 2.25% for the remainder of the year.