Canadian employment down 41,700, jobless rate holds at 6.4%
By Nojoud Al Mallees
(Bloomberg) – Employment in Canada fell by 41,700 in August, reversing some of the labour market momentum observed in recent months as manufacturing posted the only significant increase.
The jobless rate held steady at 6.4% while employment losses were concentrated in Ontario and Quebec, Statistics Canada reported on Friday.
The finance, insurance and real estate category lost almost 10,000 jobs. Employment also declined in retail and wholesale trade and hospitality. The number of public sector employees fell for a third straight month, declining by 20,000 in August and 78,000 since May.
Meanwhile, employment in manufacturing increased by 22,100, with most of that gain concentrated in Ontario.
Economists surveyed by Bloomberg expected total employment to increase by 15,000 and for the jobless rate to remain unchanged.
Two-year Canada bonds, which fell after the Bank of Canada governor made hawkish comments this week, rallied after the soft jobs data to trade at a yield of 3.114% as of 8:44 a.m. in Ottawa.
The Canadian dollar dropped sharply against the U.S. dollar, which was buoyed by a strong employment report. U.S. nonfarm payrolls increased 162,000 last month, topping all economists’ estimates.
“Today’s print seems to tally with other evidence (exports, monthly GDP) that the economy is slowing again,” Andrew Grantham, an economist with Canadian Imperial Bank of Commerce, wrote in a report to investors.
“With heightened uncertainty regarding U.S. trade, we continue to think that the Bank of Canada will remain on hold even after policymakers expressed greater concern over the inflation outlook earlier this week,” he added.
While hiring stalled across most sectors last month, the broader trend in the job market shows the economy chugging along. Employment in August was up 217,000 from a year ago, helped by a surge in employment of 181,000 in the three-month period from the end of April to the end of July.
Canada’s unemployment rate had edged down to 6.4% in July, marking the lowest level in two years. The job market recovery is part of a broader economic rebound following a year-long slump brought on by U.S. tariffs and slower immigration. Real gross domestic product in the second quarter also increased by an annualized rate of 3.3%.
However, the escalation of the U.S. trade war is now bringing Canada’s economic recovery into question. The U.S. imposed 50% tariffs on $20 billion of Canadian goods on Aug. 21, and Canadian counter-levies are set to take effect next week.
Rate hike talk ‘premature’
Bank of Canada Governor Tiff Macklem said this week that while Canada entered the latest trade tensions on a better footing, “uncertainty about the sustainability of the rebound has increased.”
Although the broader economy is expected to withstand these latest levies, the pain from the tariffs is expected to be concentrated in some sectors, Macklem said.
Friday’s report shows the layoff rate in industries dependent on US demand for exports averaged 0.9% in the 12 months to August, compared to 0.7% in other industries.
“If the bank’s intention was to signal imminent rate hikes, these employment numbers clearly suggest the warning might have been premature,” said Dominique Lapointe, senior director of macro strategy at Manulife Investment Management. “The economic backdrop is still fragile.”
The unemployment rate also ticked up for core-aged men in August, rising to 6% from 5.8% as more men between the ages of 25 and 54 years looked for work. Meanwhile, students returning to school this fall faced a more favourable job market this summer, with their unemployment rate down on average two percentage points between May and August, compared to last year.
Average hourly wages for full-time permanent employees increased by 2% on an annual basis, down from a 3% pace the previous month and below economists’ estimate of 2.9%.
–With assistance from Mario Baker Ramirez.
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Last modified: September 4, 2026
