Economists weren’t sounding the alarm after new data showed the labour market’s streak of strong performance had ended, with 42,000 jobs lost in August. The unemployment rate was stable at 6.4 per cent last month, Statistics Canada reported on Friday. In Quebec, employment fell by 19,000 in August, after remaining largely unchanged in July. The drop was concentrated in the Montreal area, where 21,000 jobs were lost. Quebec was the only province with a year-over-year employment dip in August. Still, the unemployment rate held steady at 5.6 per cent provincially and at 6.3 per cent in Montreal. Nationally, the August job losses ran counter to economists’ forecasts, which had expected 15,000 jobs to be created. Until last month, employers had been increasing their workforce at a steady pace. The economy created 181,000 jobs between April and July, including 75,000 in July alone. Most economists who spoke on Friday said they were not concerned that the labour market was giving up some of its recent gains. Andrew Hencic, an economist at TD Bank, noted in a report to his clients on Friday that a single month of mixed data shouldn’t be used as a benchmark for assessing the labour market. He said a stable unemployment rate is more important than overall job losses. “Although disappointing, given the noise in the data, a pullback is not a big surprise after a string of very positive reports,” Hencic explained. Claire Fan, an economist at RBC, noted in a report that rising retirement rates due to an aging population and a slowdown in the pace of immigration are factors behind “sluggish job growth.” She also emphasized that the unemployment rate is a more reliable indicator of labour market health. Some sectors harder hit than others The public sector cut 20,000 jobs in August, marking its third consecutive month of job losses, according to Statistics Canada. Business, real estate, and other support services sectors were hardest hit, followed by public administration, natural resources, and utilities. The manufacturing industry has been hit hard by U.S. tariffs, but the sector was an unexpected bright spot in August, adding 22,000 jobs. On Aug. 22, the United States imposed a new round of 50 per cent tariffs on approximately $28-billion worth of Canadian goods. Canada is expected to respond with its own retaliatory tariffs starting Sept. 8. CIBC economist Andrew Grantham pointed out in an interview that the August employment figures won’t necessarily reflect the impact of that tariff shock, as they’re based on surveys conducted in the middle of the month. Grantham noted that an increase in hours worked in August could be attributed to companies rushing to get their products across the border before the new tariffs take effect. That increase could reverse as early as September. The layoff rate, which refers to the proportion of people who became unemployed due to a layoff between July and August, stood at 0.8 per cent in August. This rate was 1 per cent a year earlier and averaged 0.9 per cent for the same months during the three years prior to the COVID-19 pandemic. Over the 12-month period ending in August, the layoff rate was slightly higher in industries dependent on U.S. demand for Canadian exports than in other sectors. In August, the average hourly wage for employees rose 2.0 per cent compared with a year earlier, the slowest growth since November 2017. It had increased by 2.8 per cent in July. Grantham noted, however, that wage figures from the monthly Labour Force Survey can be particularly volatile, but that there appears to be a slowdown in the pace of wage increases. Signs of a slowdown The Bank of Canada kept its key interest rate unchanged at 2.25 per cent earlier this week. The central bank noted at that time that the new U.S. tariffs were casting a shadow over the economic outlook. Governor Tiff Macklem said the economy was showing signs of recovery as a new escalation in the trade war loomed, which puts Canada in a stronger position to cope with these new tariffs. Meantime, he noted that the central bank was concerned about persistent inflation risks linked to the ongoing conflict in Iran. Grantham said the weak August employment figures confirmed that growth is likely to slow down in the third quarter, adding to similarly mixed data on exports and gross domestic product. “It’s still far too early to sound the alarm, but this seems to fit with the slowdown trend we’ve seen in some other reports,” he said. These signs of a slowing economy reinforce CIBC’s forecast that the Bank of Canada will likely keep rates unchanged through the end of the year. Grantham noted that if global energy prices also began to fall, this would curb inflation enough for the central bank to stay on hold until mid-2027. According to LSEG Data & Analytics, financial markets project the possibility of a quarter-point rate hike at the Bank of Canada’s next meeting on Oct. 28 stood at more than 25 per cent as of noon Friday. That figure remains low but is up sharply from the start of the week. Statistics Canada’s August report also marks the end of the summer job market for young people. Among workers aged 15 to 24, about 19,000 jobs were lost in August. Despite a difficult end to the season, the summer job market was statistically more favourable for young people than last year. On average, the unemployment rate for students returning to school in the fall stood at 15.9 per cent between May and August of this year, two percentage points lower than during the same period in 2025. This report by The Canadian Press was first published in French on Sept. 4, 2026.
