Canada’s job market faced 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% for the month.
The latest Labour Force Survey revealed a decrease of 20,000 public sector jobs, marking the third consecutive monthly decline, while employment in the private sector remained relatively stable. The manufacturing sector stood out positively, adding 22,000 jobs in August, while industries such as public administration, natural resources, and utilities experienced declines.
CIBC chief economist Andrew Grantham noted that manufacturing was the only sector to see a significant rise in employment during August. The data aligns with other indicators like exports and monthly GDP, suggesting a slowdown in the economy in the third quarter following a robust second quarter.
Regionally, Quebec took the hardest hit with a loss of 19,000 jobs, followed by Ontario with an 18,000 job loss. Bank of Montreal chief economist Douglas Porter commented that after a series of strong job reports, a softer report was expected, indicating a reality check for Canada’s job market.
Statistics Canada reported that average hourly wage growth in August was the slowest in nearly nine years, with a decrease to two percent on an annualized basis from 2.8% in July and 3.3% in June.
The job market data comes amidst ongoing trade tensions between Canada and the U.S. Last month, President Donald Trump imposed 50% tariffs on approximately $28 billion worth of Canadian goods, with Canada planning to reciprocate with tariffs on $27.6 billion of U.S. products starting Tuesday.
In response, the Canadian government introduced a $7.5 billion expanded economic relief program for affected workers and businesses, supplementing the existing $25 billion in tariff support implemented over the past 18 months.
The report highlighted that industries reliant on U.S. export demand are facing economic uncertainty, with higher layoff rates compared to other sectors over the past year leading up to August. Scotiabank economist Mitch Villeneuve pointed out a gradual shift in Canadian exports away from the U.S. towards other markets, particularly Europe.
On the U.S. front, the Labor Department reported that American employers added 162,000 jobs in August, with the unemployment rate holding steady at 4.1%. President Trump praised the job numbers on social media, suggesting a potential interest rate cut by the Federal Reserve.
Despite the positive job gains in the U.S., many economists expect the Bank of Canada to maintain its policy rate at 2.25% for the remainder of the year.