Canada's economy lost 68,300 jobs in September, a significant decline that erased all employment gains for the year. The unemployment rate edged up to 6.5%, surprising analysts who had predicted modest job growth. The drop was led by the public sector, particularly in education and healthcare, with a smaller impact from US tariffs.
The unexpected decline in Canadian employment raises concerns about the economy's resilience and could influence the Bank of Canada's upcoming interest rate decisions, potentially impacting borrowing costs and economic growth.
Canada's labor market experienced a surprising contraction in September, with the economy shedding 68,300 jobs and the unemployment rate ticking up to 6.5%. This marks the largest job loss this year and effectively erases all employment gains from earlier in 2024. The decline was broad-based, with significant losses in public sector roles within educational services and healthcare and social assistance, which together lost 58,400 positions.
The manufacturing sector also saw a reduction, losing 12,700 jobs, though analysts suggest the impact of recent US tariffs on Canadian industries is not yet a major driver of the overall employment figures. The decline in educational services was partly attributed to a smaller influx of international students. Employment among youth aged 15-24 also declined, with slower immigration cited as a contributing factor.
The labor force participation rate fell by 0.2 percentage points to 64.8%, its lowest level in nearly 30 years outside of the pandemic period. This decrease is linked to an aging population leaving the workforce and slower immigration rates. The growth rate of average hourly wages for permanent employees accelerated to 2.3% year-over-year in September, up from 2% in August, providing a gauge of inflation.
This employment report is the last major data release before the Bank of Canada's upcoming monetary policy decision. While markets currently anticipate no interest rate hike in October, there had been a slight increase in bets for a 25 basis point hike in December prior to the jobs data.
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