Canada lost 42,000 jobs in August—which undid some of July’s gains—while the unemployment rate stayed steady at 6.4 per cent.
Jobs data is typically noisy, with wide fluctuations from month to month—which is precisely what has happened this year. Decreasing unemployment and moderate job gains were the trend over the past year, even though August’s figures represent an unexpected downturn.
Nevertheless, the outlook is murky due to uncertainty caused by current trade tensions with the United States.
The longer that Canada and the U.S. go without returning to the negotiating table, particularly if they introduce further tariffs in the interim, the more hesitant businesses might be in hiring.
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September could see further job losses as the U.S. tariff rate of 50 per cent on select Canadian imports is unsustainable to maintain operations, especially for smaller businesses with less ability to pivot and diversify.
We expect the Bank of Canada to continue holding its key interest rate through the end of the year due to ongoing trade uncertainty that will inevitably affect jobs.
What the data shows
August’s losses broke the streak of consecutive job gains from April to July.
While the numbers from August could simply be an anomaly, the decreasing wage growth might point to excess capacity in the economy.
Wage growth fell to 2 per cent in August, the lowest since 2021 and a sudden drop from years of wage growth above 3 per cent. This is also a sign of business caution and a more balanced job market.
But this trend could also keep inflation anchored as lower wage growth keeps costs in check—meaning businesses would not have to raise prices to pass the cost along.
One should not expect strong job growth as a baseline in the upcoming months as trade uncertainty looms over Canada’s economy.
That said, Canada’s underlying resilience will be emboldened by the federal government’s support programs for businesses affected by tariffs.
Ottawa’s $7.5 billion package, which includes initiatives such as interest-only loans for 36 months and diversification funds, should help mitigate the negative effects of tariffs.
The unemployment rate remained steady and below what has been in the past year, while the employment rate edged down slightly by 0.1 percentage points to 60.8 per cent.
The latest losses were entirely in the services-producing industries—which shed 51,500 jobs—while goods-producing industries gained 9,800 jobs.
The most profound gains were seen in manufacturing (22,100 jobs) and information, culture, and recreation (12,000 jobs). The biggest losses were seen in business, building and other support services (19,900 jobs) and trade (10,500 jobs).
There is no guarantee that the winning streak in manufacturing will continue, especially as escalating tariffs could give businesses pause.
This summer was a favourable job market for returning students, as their unemployment rate was 15.6 per cent in August—which is lower than last year’s figure. From May to August, the average unemployment rate for returning students was 15.9 per cent, down from 17.9 per cent for that same time frame in 2025.
Youth unemployment is down from last year as well, which is encouraging for new labour market entrants.
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Canadian businesses have adapted to the current reality—and the economy is chugging along for the most part. But it is undeniable that businesses that rely on trade in the U.S. have been—and will continue to be—hit harder despite diversification efforts.
Industries dependent on U.S. demand for exports are disproportionately affected. The layoff rate over the past year averaged 0.9 per cent in these industries compared to 0.7 per cent for other industries.
