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 percent during the same period.
The most recent Labour Force Survey revealed a decrease of 20,000 public sector jobs for the third consecutive month, while private sector employment remained relatively stable. Notably, the manufacturing industry saw a positive trend by adding 22,000 jobs in August, contrasting with 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 significant job growth in August. This data aligns with other economic indicators, suggesting a slowdown in the economy during the third quarter after a robust second quarter performance, with increased uncertainty surrounding U.S. trade relations.
Quebec experienced the most significant job loss with 19,000 fewer jobs, followed by Ontario with an 18,000 job decline. Bank of Montreal chief economist Douglas Porter commented that after a series of strong job reports, a more subdued outcome was expected. Although the current report reflects a softening in the job market, it was not entirely unexpected.
Hourly wage growth in August was the slowest in nearly nine years, with a 2 percent increase on an annual basis, down from 2.8 percent in July and 3.3 percent in June. The Reuters poll predicted a job increase of 15,000, with an unchanged unemployment rate at 6.4 percent.
This data marks a reversal from the previous months, where the Canadian economy added 75,000 jobs in July and a total of 181,000 jobs between April and July. The ongoing trade tensions between Canada and the U.S., including recent tariff impositions, have added to economic uncertainty for various industries.
In response to the economic challenges, the federal government introduced a $7.5 billion relief program for affected workers and businesses, supplementing the existing tariff support exceeding $25 billion over the past year and a half. Statistics Canada highlighted that industries reliant on U.S. export demand are facing heightened economic uncertainty, with higher layoff rates compared to other sectors.
Scotiabank economist Mitch Villeneuve mentioned that the share of Canadian exports to the U.S. is gradually decreasing, while exports to non-U.S. markets, particularly Europe, are growing. Meanwhile, Bank of Canada Governor Tiff Macklem acknowledged the impact of U.S. tariffs on a limited range of goods.
Job gains in the U.S. contrasted with Canada’s job market decline, with American employers adding 162,000 jobs in August. The U.S. unemployment rate remained at 4.1 percent. President Trump lauded the job numbers, advocating for a Federal Reserve interest rate cut to support economic growth.
Despite the contrasting job market outcomes, many economists anticipate the Bank of Canada to maintain its policy rate at 2.25 percent for the remainder of the year.